The enactment of new legislation means over 3.2 million Americans will receive a larger Social Security payment — implications for retirement planning
The majority of individuals are employed in positions subject to Social Security taxation, but there are exceptions. Certain public employees and government workers accrue pension benefits without contributing Social Security taxes from their earnings.
Previously, the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) laws prevented such individuals from receiving Social Security benefits, even if they also held jobs covered by Social Security. These laws have now been overturned by the Social Security Fairness Act.
President Joe Biden noted, “The previous legislation deprived millions of Americans of significant Social Security benefits, costing them thousands of dollars annually. Surviving spouses of public servants were also affected, causing financial insecurity and a loss of dignity.”
With the repeal of these laws, an estimated 3.2 million workers, including professions like police officers, teachers, and firefighters, may qualify for substantial increases in Social Security benefits. Here’s what this means for them and tips on adjusting retirement plans accordingly.
How will the Social Security Fairness Act impact you? If you or your spouse worked in a non-Social Security-covered job that provided a pension, along with a job that offered retirement benefits, your Social Security payments could have been reduced by the WEP or GPO, or you might not have received any benefits at all.
This Act will rectify the situation for you, potentially allowing you to receive the full Social Security benefits earned over your career.
Individuals entitled to a one-time retroactive benefit increase dating back to January 2024 can anticipate receiving it by the end of March. Some beneficiaries will begin receiving higher monthly Social Security payments commencing in April.
According to estimates from the Congressional Research Service, payments may increase by an average of $360 per month, with some individuals potentially seeing over $1,000 in additional monthly retirement income. On average, retroactive payments will amount to $6,710.
President Biden emphasized, “By signing this bill, we are extending Social Security benefits for millions of teachers, nurses, and other public employees, as well as their spouses and survivors. This translates to an estimated average increase of $360 per month, a significant boost for middle-class households, including the one I grew up in.”
For further information: I’m 49 years old and have nothing saved for retirement — what should I do? Do not panic. Here are 5 simple steps to start building your retirement savings.
Catch up quickly with the latest payments for retirees. Most people will automatically receive their retroactive payments and increased checks without needing to take any action. However, individuals who never applied for retirement, spousal, or survivor benefits due to the WEP or GPO should apply online or call 1-800-772-1213. Make sure your direct deposit details and mailing address are current.
Align your retirement planning with Social Security, savings, and pension benefits to ensure financial stability. By leveraging increased Social Security payments, you may reduce withdrawals from your retirement accounts, improving your long-term financial outlook. Maintain required minimum distributions to avoid penalties.
The additional funds can help offset inflation and rising expenses, supporting retirees amidst economic challenges. Assess your net worth, create a budget, and spend wisely to maximize the benefits you’ve earned. Stay informed about upcoming changes in government benefits.
Explore more on cybersecurity to protect your finances, identify common overspending mistakes, and safeguard your retirement savings with simple money management techniques. This article is for informational purposes only and does not constitute financial advice.
