Your Social Security Check Might Be Getting Bigger

In one of his last acts in office, former President Biden signed the bipartisan – JD Vance’s last yea vote on substantive legislation as an Ohio senator – Social Security Fairness Act. Passing the House of Representatives 327-75 and the Senate 76-20, it effectively eliminates two policies that have burdened American retirees for 40 years.

The Windfall Elimination Provision, or WEP, which reduces Social Security benefits for individuals who also receive a pension or disability benefit from an employer that did not withhold Social Security taxes, is no more.

The Government Pension Offset, or GPO, which reduces benefits for spouses, widows and widowers who also receive government pensions of their own, was also allowed to sunset. The result should be more income every month for millions of American retirees.

Pays of Futures Past

Emphasis on “should”. The act was signed January 5th, but no word yet on when it’s going to kick in. The Social Security Administration could take a year to recalculate all the effected accounts, then cut checks to cover the added benefits retroactively to January 2024.

And, while few on Capitol Hill are likely to vote against giving senior citizens – the highest-propensity voters – more money, some deficit hawks did raise the specter of depleting the Social Security trust fund that much sooner. So, it doesn’t look like those bigger checks are showing up in mailboxes anytime soon.

Not every retiree is going to see a benefit. The act’s key provision is the elimination of GPO. If you or your spouse ever worked a civilian government job, then you know that the money you put into your retirement plan there counted against your Social Security benefit calculation. Those three million individuals or couples are the main targets for this largesse. Such local heroes as former teachers, police and firefighters will benefit alongside federal Civil Service retirees.

The WEP’s repeal won’t affect as many people. It just makes whole those Americans who paid into a foreign equivalent of Social Security but are ineligible for benefits in their non-U.S. employer’s country.

Homework

If you’re one of the lucky ones, you could see an extra $1,000 per month. But how do you get your money? If you never applied for retirement or spouse’s benefits because of WEP or GPO, you may need to file an application at www.ssa.gov/apply. The survivor benefit application is not available online.

Social Security will take an application by telephone for people who did not previously apply for retirement benefits because of WEP, or spouse’s or surviving spouse’s benefits because of GPO. Call 1-800-772-1213 during business hours with any questions. When the system asks, “How can I help you today?”, reply by saying “Fairness Act.”

What to do with all that money?

For people living close to the edge, the Fairness Act money could be life changing. If you’re reading this, though, it’ll make retired life a little easier, but it comes with its own set of complications and questions. What are the tax implications? Does it put you in a higher bracket? Does it raise your income above the annual compensation limit for the IRA you’re still contributing to? Might it be a good idea to just “forget” to apply for it?

These are all good questions for your Smith Anglin advisor.