Retiree Receives One-Time Pension Payment Mistaken for Permanent Raise
Diane, a retired public employee, received what she believed to be a permanent raise in the form of a supplemental pension payment known as a '13th check.' However, this one-time deposit was not an increase in her monthly base benefit and did not recur. The unexpected income also had tax implications: it pushed more of her Social Security benefits into taxable territory. Supplemental payments like Diane's vary by retirement system and are typically non-recurring. Unlike a cost-of-living adjustment (COLA), which permanently increases the pension, these checks do not alter future monthly amounts. The additional income can affect tax calculations for retirees who file as single individuals with combined incomes above $25,000—up to 85% of Social Security benefits may become taxable at higher thresholds. Retirees are advised to use one-time payments like the '13th check' for specific expenses rather than recurring costs. The article highlights how such supplemental income can inadvertently increase tax liability and Medicare premiums if it crosses certain financial thresholds.
