Social Security is part of the retirement plans of over 70 million Americans. If you are one of them, you need to accurately forecast your benefit amount before you retire. This estimate helps you understand how much you need to save to bridge the gap between your government benefits and your retirement expenses.
In the past, employees of public organizations and their spouses had to contend with two unpopular rules that reduced their Social Security benefits – WEP and GPO. Now, those rules have been eliminated in the Social Security Fairness Act and millions of people will see higher benefit amounts.
What Is the Social Security Fairness Act?
The Social Security Fairness Act is a bipartisan bill that was signed into law on January 5, 2025. It eliminates two common provisions that impacted people with public pensions as well as Social Security income.
Upon signing the bill into law, President Biden said, “Americans who have worked hard all their lives to earn an honest living should be able to retire with economic security and dignity.” He also said that many people worked multiple jobs in addition to those that provided a public pension, and the old benefit cuts cost them security and dignity.
What Provisions Did the Social Security Fairness Act Eliminate?
The new law cut the Windfall Elimination Provision [WEP] and Government Pension Offset [GPO] provisions. They were intended to reduce benefits for people, spouses, and surviving spouses who had government pensions in addition to Social Security benefits.
Who Was Impacted by the Windfall Elimination Provision?
The WEP applied to three groups of people. The first was Social Security beneficiaries who paid into a pension for a job which did not withhold Social Security taxes. The second was people who turned 62 or became disabled after 1985 and were eligible for a pension from a job where Social Security taxes were not paid. Finally, the WEP applied to federal employees who served under the Civil Service Retirement System [CSRS] after 1956. The people impacted by the WEP saw their benefits reduced to no more than half of the pension they received from non-covered work.
Who Was Impacted by the Government Pension Offset Rule?
The GPO was a rule that affected spouses and widow(er)s of Social Security beneficiaries when the spouse or widow(er) received a pension from a government job. This provision reduced Social Security spousal or survivor benefits by two-thirds of the beneficiary’s pension amount – and could even eliminate Social Security payments.
How Could the Social Security Fairness Act Impact You?
If you or your spouse worked for a public organization that did not withhold Social Security taxes, you could see a higher Social Security benefit amount in the future. In certain cases, you could also receive a lump sum payment for missed benefits. The impact of the new law varies based on the date on which you begin receiving Social Security benefits.
The Social Security Fairness Act for Those Preparing for Social Security
The elimination of the WEP and GPO could cause you to receive a higher benefit amount during retirement if you would have been subject to either rule under the old legislation. The higher payments can help you achieve a satisfying retirement.
The Social Security Fairness Act for Those Already Receiving Benefits
In addition to higher benefits in the future, current Social Security recipients could receive a lump sum payment for missed benefits under the WEP and GPO rules. The timing of these payments is still undecided according to the latest information from the Social Security Administration. However, President Biden said that they would be paid in 2025.
What You Need to Do to Prepare for The New Changes
The Social Security Administration is still evaluating how to implement the Social Security Fairness Act. However, they have announced that there is nothing that people who are preparing to receive benefits need to do at this time.
Those who are already receiving benefits should ensure that the Social Security Administration has their current mailing address and direct deposit information. You can update your information online using the MySocialSecurity portal, by phone, or by visiting your local Social Security office.
If the WEP or GPO would have applied in your situation, be sure to contact an experienced financial advisor promptly to adjust your financial plan to account for the higher benefit amount. You may also need to adjust your filing strategy if your spouse would have been subject to the GPO in the past but no longer needs to account for the applicable reduction in benefits. A financial advisor is an excellent resource to evaluate your filing strategy and determine if any changes need to be made.
Get Answers to Your Social Security Questions with Meld Financial
At Meld Financial, we have been helping clients maximize their government benefits for forty years. Our team can answer your most pressing questions, help you determine when to apply, and guide you through the process of reviewing your benefits this year.
Government benefits from Social Security and Medicare are just one part of our wholistic wealth management program, Financial Fingerprint®. This comprehensive program brings together the most important parts of your financial picture into one easy to understand plan.
To ask a question about your Social Security benefits or get started with Financial Fingerprint®, contact a member of our team today.
