When Can I Expect An Increase In My Social Benefit Increase Due To The Fairness Act? #243
In this episode, I dive into the latest developments with the Social Security Fairness Act and what these changes mean for retirees who were previously ineligible for Social Security benefits. With potential increases in payments and retroactive benefits, this episode is packed with critical insights for anyone impacted by the new law.
I break down real-world examples to show exactly how these changes will affect individuals—particularly teachers, former public employees, and those with pensions exempt from Social Security. Whether you’re waiting for retroactive benefits or trying to understand the tax implications, I’ve got you covered with the essential information you need.
You will want to hear this episode if you are interested in...
(1:07) Changes to the Social Security Fairness Act
(2:57) Benefits and retroactive payments
(5:05) How the Social Security Fairness Act works
(6:52) How the spousal benefit works
(6:30) How the new law will impact retirees
(11:32) How survivor benefits now work
(14:05) The impact of the Windfall Elimination Provision
(15:16) What do you need to do?
(16:57) How Social Security benefits are taxed
Key Changes from the Social Security Fairness Act
The Social Security Fairness Act has brought significant improvements for retirees who were previously excluded from Social Security benefits due to their work in positions exempt from Social Security contributions, such as teachers and public employees.
Before this Act, individuals who worked in these jobs often faced reduced benefits under the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO). These provisions lowered or eliminated their eligibility for Social Security benefits, which could create financial hardship during retirement.
Now, with the passing of this Act, those affected will see increased benefits, with payments set to be retroactive back to January 1, 2024. This means many retirees who were once excluded from Social Security will now be able to collect the benefits they’ve earned. These changes will positively impact millions of retirees across the country, providing them with much-needed financial support in their retirement years. These changes are now going into effect, sooner than expected, in April 2025.
How Spousal Benefits Are Affected
The Social Security Fairness Act brings significant changes to how spousal and survivor benefits are handled, especially for those who were previously affected by the Government Pension Offset (GPO).
In the past, if a spouse was receiving a pension from a job exempt from Social Security, like a public school teacher, they couldn’t claim the full spousal benefit from their partner’s Social Security. This left many retirees with reduced or no Social Security benefits at all.
For example, consider Judy, a retired Connecticut teacher who worked for 30 years. Judy’s husband, Jim, worked in a job covered by Social Security and received $3,100 a month in Social Security benefits. Under the old rules, Judy wasn’t eligible for any spousal benefit due to the GPO, even though she had no Social Security earnings of her own.
However, with the changes introduced by the Social Security Fairness Act, Judy can now claim a spousal benefit based on Jim’s Social Security. She’s eligible for half of his full retirement benefit, which is approximately $1,300 per month, significantly boosting her income. In addition, Judy will receive a retroactive payment going back to January 2024 for the benefits she missed out on, providing her with a financial windfall.
Understanding the Tax Implications of Social Security Benefits
Social Security benefits are subject to income taxes, but how much of the benefit is taxed depends on the total income of the retiree. For individuals with a total income below certain thresholds, such as $25,000 for singles or $32,000 for married couples filing jointly, none of their Social Security benefits will be taxed. However, if a retiree’s income exceeds these thresholds, a portion of their Social Security benefits could be included in taxable income, with up to 85% potentially being taxed.
Understanding these tax rules is important for retirees to avoid surprises during tax season and to properly plan for their retirement. Additionally, there are ongoing efforts in Congress to make Social Security benefits tax-free for all recipients. While this is not yet law, it’s an important development to watch as it could greatly impact retirement planning in the future, allowing retirees to keep more of their benefits and reducing the tax burden on those who rely on Social Security as a primary source of income.
Resources Mentioned
Subscribe to the Retire with Ryan YouTube Channel
Apply for Social Security at https://www.ssa.gov/myaccount/
Episode #217: Will Social Security Become Tax-Free?
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