Millions of retirees cheered when ex-President Joe Biden signed the Social Security Fairness Act, which raises benefits for over 3.2 million retirees and their spouses by scrapping two anathematized provisions. Retirees hunting for an immediate jolt of cash, however, recently discovered another turn of events that postpones when they can actually start cashing in on those checks.
Social Security Fairness Act
It’s a highly technical program, loaded with provisions full of rules as to who may receive some dollar amount. The Social Security Fairness Act rescinds two antiquated provisions that decrease the level of the benefit for certain recipients.
- Windfall Elimination Provision (WEP): This provision reduced Social Security benefits for retirees who also received a noncovered pension that is, one from an employer that did not withhold Social Security taxes. WEP mainly targeted state and local government employees, teachers, and other federal workers. In 2022, WEP affected over 2 million Americans.
- Government Pension Offset (GPO): GPO reduces or eliminates spousal or survivor Social Security benefits by the amount of a noncovered pension. In 2022, GPO applied to about 734,000 beneficiaries, or 12.6 percent of recipients dependent on spousal benefits.
Many seniors and their spouses would see benefits increased by possibly thousands of dollars a month in Social Security checks if WEP and GPO are eradicated. According to the SSA, some recipients will see an estimated $1,000 or more per month above what they could have otherwise had.
Benefit Increases and Impact
The Social Security Fairness Act will affect people in different ways based on their noncovered pension and Social Security entitlements. This is because up to $1,000 more per month-it’s a pretty big change when you factor in that the average Social Security retirement benefit in December 2024 was $1,926 per month.
Also, the cost of living adjustment for 2025 is already enacted and is reported as a 2.5 percent COLA for retirees. This will double possible enormous increases for WEP and GPO-impacted retirees in total retirement income- awaiting SSA actions on the legislation.
Unexpected Delays
While the retirees welcomed an increase in their benefits, most were frustrated with the lag time in implementation. The SSA has recently said it is experiencing difficulty in effectively implementing the legislation due to funding shortages and manpower gaps.
Why the Delay?
- No Additional Funding: The legislation passed without a fund allocation to process the benefits recalculations.
- Complex Revisions: More than 3 million beneficiaries will need the SSA to recompute their benefit, and with this comes the retroactive changes from the initial months of 2024.
- Staffing Shortages: The SSA implemented hiring freezes and lower personnel from November 2023. This impacted the rate at which implementation occurs.
Most retirees will thus have to wait for more than a year to see any kind of increase in their Social Security benefits.
How Retirees Can Prepare
If you have been affected by WEP or GPO, here’s what to keep in mind as you wait for the SSA to work out your benefits:
- Be Patient: The SSA has confirmed that the payments will be retroactive to the beginning of 2024, so you will get all the increases owed to you.
- Budget in a planned way: There is no guarantee when money might reach you, so take very few sudden financial decisions which depend on getting a raise in your benefit.
- Check Eligibility: If you never applied for spousal benefits because of GPO, now would be a good time to check if you qualify for payments under the new rules.
- Follow SSA Updates: Keep updated by frequently checking SSA’s website or calling a Social Security representative for updates on implementation.
Maximizing Social Security Benefits
Most retirees overlook potential jumps in their Social Security checks. In many instances, waiting for retirement benefits, selecting the best way to file spousal claims, and building the optimal work record will yield significant jumps in those checks. For some claimants, even as much as $22,924 per year might become part of that Social Security check, depending on how they structure their claims decisions.
Benefit Maximization Strategies
- Delayed Benefits: If possible, you can delay taking Social Security up to full retirement age or even age 70 to increase the monthly benefits you receive.
- Spousal and Survivor Benefits: Married retirees may want to review whether they are eligible for spousal benefits, which can now be more lucrative under the new law.
- You can also check your Social Security earnings record to make sure everything is accurate, which will help you get the most from your benefits.
- Part time work and investments: Some retirees will supplement their income with part-time work, dividend stocks, or high yield savings accounts in hopes of catching up on lost income until the higher payments come through.
Future of Social Security
The Social Security Fairness Act is the next step in bringing the system toward greater equity. The increase that will finally arrive to many retiree checkbooks, however, will have a very long journey to take effect. A component of this broad malaise plaguing Social Security is its lack of underfunding and administration delay. For now, it will just be wise to keep close budget accounts and conduct diligent research about possible sources of retirement income.
Because social security benefits have of late been increasingly more vulnerable to legislative manipulation and delay, there has been an added need to keep abreast and be forward-looking about money. Older workers must be keeping track of their financial plans, looking for new income-generating strategies, and advocating further improvements in the Social Security program to build fiscal security well into the future.
Conclusion
A good news signal is the increase in benefits under the new Social Security law to 3.2 million retirees. But with the increase comes a rather unwelcome side effect in the form of higher taxes, and perhaps reduced eligibility for other benefits, and maybe even some policy changes down the road. Retirees have to be well-equipped to cope with all of these changes in order to be able to capitalize on this hike while minimizing the downsides. Keep track of the changes in policies and advise financial experts in order to guarantee a stable and secure retirement.