How the Social Security Fairness Act Could Positively Impact Your Retirement, #236
President Biden recently signed the Social Security Fairness Act into law, bringing significant changes to Social Security benefits for millions of public school teachers and former public employees. This new legislation eliminates provisions that previously reduced or limited their benefits.
In this episode, I’ll break down how the bill works, who it impacts, what it means for you, and what steps you need to take to claim any additional benefits you may be eligible for.
You will want to hear this episode if you are interested in...
[0:45] Social Security Fairness Act
[1:24] Download my new book for FREE
[2:22] What is the Social Security Fairness Act?
[6:27] When does this go into effect?
[7:00] How can this benefit you?
[10:37] How the survivor benefit will work
[12:46] Do you need to do anything?
What is the Social Security Fairness Act?
The Social Security Fairness Act affects approximately 2.8 million people in the United States, including teachers in 14 states. These teachers are currently exempt from paying into Social Security because their states have opted to provide their own retirement plans instead.
As a result, neither the teachers nor their states contribute to Social Security. However, this exemption impacts the Social Security benefits these teachers—and some other public employees—are eligible to receive.
This bill repeals two provisions:
The Windfall Elimination Provision (WEP): This provision reduces the Social Security benefits you’re eligible to receive based on your earnings record. For most teachers, this has resulted in reduced benefits.
The Government Pension Offset (GPO): This provision affects survivor benefits. If you receive a pension from a job that didn’t pay into Social Security, you’ll only receive a dollar amount that goes above and beyond two-thirds of your pension for any spousal or survivor benefits you’re eligible for. This often leaves little or no Social Security benefit for survivors.
The Social Security Fairness Act will be retroactive to January 1, 2024. If you received Social Security benefits in 2024, you should expect a retroactive payment. However, it’s still unclear whether these payments will be made as a lump sum or distributed over time.
How much can this benefit you?
Let’s look at a few examples to understand the impact of the Social Security Fairness Act:
Spousal Benefit Example: Jim worked in a job where he paid into Social Security and he currently receives $3,000 per month. Judy, his wife, was a teacher for 30 years, never paid into Social Security, and collects a $3,000 monthly teacher’s pension. Normally, Judy would qualify for a spousal benefit equal to half of Jim’s Social Security benefit ($1,500). However, because two-thirds of her pension ($2,000) is higher than $1,500, she receives no spousal benefit. With the repeal, Judy will now be eligible for the full $1,500 monthly spousal benefit.
Single Person Example: Jane, a retired teacher, receives a $3,000 monthly pension. Before working in public education, she paid into Social Security and it shows that she is eligible for $1,000 per month. However, because she doesn’t have 30 years of work history, her benefit was reduced by $587, leaving her with only $413 per month. Once the repeal goes into effect, Jane will receive the full $1,000 monthly benefit.
Survivor Benefit Example: Sarah, a retired public-sector worker, receives a $4,500 monthly pension. Her husband, who paid into Social Security, passed away and had been receiving $2,900 per month. Under the old rules, Sarah’s survivor benefit was eliminated because two-thirds of her pension exceeded her husband’s benefit. After the repeal, Sarah will be eligible to receive the full $2,900 survivor benefit.
The Social Security Fairness Act represents a significant financial improvement for those impacted by these provisions.
If you know anyone who could be impacted by this, make sure you pass this episode on to them! And if you have any questions, don’t hesitate to reach out!
Resources Mentioned
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Millions of Public Workers to get Higher Social Security Benefits