3 Ways the Social Security Fairness Act Could Affect Retirees’ Budgets
Written by
Gabrielle Olya
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The Social Security Fairness Act, which was signed into law on Jan. 5, eliminates the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) that were reducing or eliminating many public servants’ Social Security benefits. Around 3 million Americans could be significantly impacted by this update, including teachers, firefighters, police officers, federal employees covered by the Civil Service Retirement System and people whose work had been covered by a foreign social security system.
Here’s a closer look at how the Act can affect your budget if you’re a retiree who will be impacted.
How To Know If the Social Security Fairness Act Applies To You
If you’re a public servant who is currently receiving Social Security benefits, you likely will be affected — but in many cases, you don’t need to do anything to take advantage of the change.
“If someone is currently receiving [Social Security Administration] benefits on their own or spouse’s record and the Social Security Act has their current contact and/or direct deposit information, then no action is needed currently,” said Kimberly Gattis, manager of financial planning at UMB Bank. “Social Security is encouraging people to wait until April to contact them to ask about the status of any retroactive or increased payment.”
If you are not already receiving benefits because you were not eligible due to the WEP or GPO, you may need to file an application with the Social Security Administration.
“The most convenient way to do this is on the SSA website, but the Social Security Administration will currently accept application by telephone for people in this situation,” Gattis said. “They should contact the SSA and reply ‘Fairness Act’ when prompted.”
However, not everyone is eligible for the changes outlined in the Act.
“This change affects those who are currently not eligible or receiving reduced SSA benefits because they receive a public pension based on work not covered by Social Security — this would be people that did not have Social Security tax withheld during their employment in those positions,” Gattis said. “Not all people receiving public pensions will see an increase.”
What You Need To Know About Changes to Your Benefits
If the Act applies to you, you can expect to see an increase in your benefits.
“If someone is in this group and is currently receiving SSA benefits, they need to know that their benefits will no longer be reduced or eliminated by a pension they are receiving,” Gattis said. “In the case of a spouse that was unable to receive a benefit due to their own pension, then they will now be eligible to receive a spousal benefit that could be up to approximately half the amount of their spouse’s full retirement monthly benefit.
“It is also important that any ex-spouses investigate whether they are now eligible to receive these benefits based on an ex-spouses’ earnings.”
How the Act Can Impact Retirees’ Budgets
The Social Security Fairness Act can add some breathing room to retirees’ budgets.
“This change has the possibility of making small or large changes to an impacted retiree’s budget,” Gattis said. “If someone is now eligible to receive benefits based on their own earning record, this amount may be nominal or substantial based on the amount of that outside earning record.
“For spouses that are now eligible to receive benefits, this may be an additional amount or a new monthly income based on their age and spouse’s benefits,” she continued. “This change will (1) give retirees more income for current or increased lifestyle spending, (2) allow for more charitable gifting or (3) even more investment growth as the amount they need to withdraw from current savings may be reduced.”
In late February, the SSA announced that it will begin to issue any retroactive payments by the end of March and will process increases to monthly benefit payments beginning in April. Retroactive payments will be applicable on any payments owed as of January 2024 when WEP/GPO offsets expired.
“It is possible people will see a retroactive payment of an increase on their payment prior to receiving a notice in the mail,” Gattis said. “These payments or increases will vary based on the amount of the current offset. People should work with their tax advisor to ensure they are withholding the appropriate amount on the additional or new benefit payments. They should also evaluate their budget and work with their financial advisor to properly save or invest any funds not currently needed.”
More From GOBankingRates
