Some Retirees Are Getting Increased Social Security Benefits — Here’s the No. 1 Downside
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T. Woods
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Amber Barkley
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Among his last actions in office, former President Joe Biden signed into the law the Social Security Fairness Act (SSFA) on Jan. 5, 2025.
The SSFA is designed to eliminate the windfall elimination provision (WEP) and government pension offset (GPO) from the Social Security system, as WEP and GPO decreased the monthly Social Security payments for certain seniors — specifically, those whose employers paid out pensions that weren’t covered by Social Security.
Eliminating WEP and GPO allows these seniors to receive even more in their monthly Social Security payments. This sounds like good news for retirees on fixed incomes, but it comes with a potential downside.
The Downside of the SSFA
While the nearly three million public sector workers impacted by the SSFA will receive higher Social Security payments, those very same increased payments can actually cost retirees in the end because of taxes.
Newsweek pointed out that seniors who file individual income tax returns with an income between $25,000 and $34,000 must pay tax on up to 50% of their Social Security benefits. However, those whose SSFA-increased benefits now earn them over $34,000 will find that up to 85% of their benefits will be taxed.
Similarly, those who file jointly and now find their income climbing above $44,000 will go from a 50% tax burden to 85%.
It’s important to understand that this is not a 50% or 85% tax on benefits. Rather, up to 85% of the benefits received will be subject to federal taxes.
Those who might be impacted — specifically, such public sector workers as firefighters, police officers and teachers — should coordinate with a professional tax advisor or financial expert in order to minimize this potential downside to the SSFA.
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