What is the Social Security Leveling Option?

Social Security Leveling Option

A Social Security Leveling Option on your pension may help you afford early retirement

The Social Security Leveling Option

The Social Security Leveling Option is a feature offered by pension plans to level out the income of someone who retires early. The leveling applies to the amount of pension payments and not to the amount of Social Security you will receive. If your employer offers a Social Security level option, it may be easier to take an early retirement.

How Social Security Income Works

If you were born after 1942, Social Security retirement age is between 66 and 67 to collect full retirement benefits, depending on year of birth, . You can begin receiving reduced Social Security checks as early as age 62, but these benefits are reduced forever. However, there is no option (for non-disabled individuals and non-widowed spouses) to receive Social Security benefits prior to age 62. If you decide to retire prior to age 62, you will need other sources of income. Social Security is indexed to inflation, so every year the Social Security Administration will determine by how much (if at all) they will increase Social Security benefits.

READ: 401K Contribution Limits

How Social Security Level-Up Options Work

The idea behind the Social Security Leveling Option is to provide an increased pension benefit to early retirees while they wait for Social Security Benefits to kick in. Once SS benefits commence (or generally speaking, at age 65), the pension stream would be lowered, thus keeping the retirees total retirement income stable both before and after Social Security begins. It should be noted that the pension leveling option is independent of any Social Security decisions. In other words, you could elect the pension leveling option and then take Social Security benefits as early as 62, or as late as 70.

For example, let’s assume you opted to retire at age 60, and your initial pension payment would be $1,500 per month. In a couple of years when you turn 62, you will start receiving $1,000 per month from Social Security for a total retirement income of $2,500 at that time. If you elected the level pension option, your initial pension amount would be increased to $2,000 and then reduced to $1,000 when you start receiving $1,000 from Social Security. The level pension plan keeps your retirement income at a steady $2,000 per month throughout retirement instead of starting your retirement earning $1,500 and then jumping to $2,500 per month when you start to receive Social Security.

READ: Pension Plan Options – Lump Sum or Other Annuity Options (including Social Security Leveling)


Social Security Leveling has two main requirements: you must be eligible to receive benefits from your employer’s pension plan and you must provide your employer with a written estimate of your Social Security benefit. Although the estimate is usually based on benefits available at age 62, some plans will accept an estimate of benefits available at full retirement age (66), or age 65.

Whether the option makes sense depends on how early you are retiring compared to how much money you give up in long-term pension payments. Social Security has cost-of-living increases, and your pension may also, which could also affect the long term results. But most private company pensions (versus municipal) do not have inflation adjustments. It is best to map out your various income options over time to determine which might work best for your circumstances.

READ: Desired Replacement Rate


About Robert Henderson and Lansdowne Wealth Management

Robert Henderson is the President of Lansdowne Wealth Management, an independent, fee-only advisory firm in Mystic, CT. His firm specializes in financial planning and investment management for retirement, with a special focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or You can also view his personal finance blog, The Retirement Workshop at and the firm’s website at

If you are an employee or retiree of General Dynamics, Pfizer, or L&M Hospital, and you would like advice and direction on managing your Fidelity 401K or Hewitt 401K plan, please sign up for our monthly newsletter, which provides complimentary ongoing advice, commentary, and model portfolios for each of those plans. You can sign up automatically at Your 401K

See my Google+ Profile


401K Contribution Limits For 2016

401K Contribution Limits

Each year the IRS publishes updated Maximum 401K contribution limits, as well as catch-up contribution limits for the new year. Typically, the limits the IRS sets each year is based on inflation factors (with minimum $500 increases), so they do not … [Continue reading]

An Important Market Update – Is the Sky Falling?

Stock Market

The Sky is Falling Well, not quite. In the past week, we have seen the S&P 500 (the broad U.S. stock market, generally speaking) drop roughly 7%. This represents nearly the entire drop in the S&P on the year. Prior to this past week, the … [Continue reading]

Market Update for May 2015

Robert Henderson

MAY 2015 ECONOMIC COMMENTARY AND CAPITAL MARKET UPDATE Recap: The U.S. economy grew at a 0.2% annual rate in the first quarter. It was the worst economic performance in a year, with evidence of a slowing international trade sector and anemic … [Continue reading]

Lansdowne Wealth Management in the News

Robert Henderson

Check out some of the articles that Robert Henderson and Lansdowne Wealth Management have published or been quoted in over the years. Mint.Com - Expert Interview with Bob Henderson on Managing Your Finances During a Divorce - Expert … [Continue reading]

Financial Planners Every Investor Should Follow on Twitter

I was very honored to be mentioned in Dividend.Com recently, for an article highlighting the 16 financial planners that every investor should follow on Twitter. From writer Shauna O'Brien: "Twitter can be a great place to find resources and … [Continue reading]

Interview with Robert Henderson on Saving for Retirement Later in Life for

Retirement Planning Later in Life

See my interview in, talking about how to make up for lost time when saving for retirement... "We’re guessing there might be one or two readers out there who are overwhelmed about the amount of money they need to save to retire … [Continue reading]

Best Paying Careers

Best Paying Career

This is a great article from Business Insider showing the Best Paying Careers among 820 different occupations. The article shows a data chart which was constructed by Reddit user Dan Lin, pulling wage data from the Bureau of Labor Statistics. This … [Continue reading]

IRA Contribution Limits 2016

401K Contribution Limits

IRA Contribution Limits Each year the IRS publishes updated IRA contribution limits, as well as catch-up contribution limits for the new year. Typically, the limits the IRS sets each year is based on inflation factors (with minimum $500 … [Continue reading]

Best Financial Posts of the Week…07-22-13

Here is a roundup of some of the best posts of last week on the web: Weighing the Week Ahead: It's All About Earnings - Jeff Miller Slower … [Continue reading]

Fee-Only Financial Advisor in CT

Lansdowne Wealth Management, LLC ("LWM") is an independent, fee-only financial planning firm based in Mystic, Connecticut that offers financial retirement strategies backed by education, knowledge, and experience. Our clients depend on us to provide … [Continue reading]