One of the cornerstones of American retirement got a slight
facelift recently when Congress passed the Social Security Fairness Act and
President Biden signed the act into law on January 5th of this year.
The Social Security Fairness Act benefits nearly 3 million
public sector employees who previously received lower Social Security benefits
because of two provisions of Social Security: The Windfall Elimination Provision
(WEP) and Government Pension Offset (GPO). Both provisions were introduced
decades ago to improve the longevity of Social Security by reducing benefits
for workers who received pension benefits and had earned lower amounts of
Social Security credits.
The elimination of the Windfall Elimination Provision and
Government Pension Offset means that nearly three million public sector
employees, including teachers, police, and firefighters will receive increased
monthly benefits estimated at an average of $360 per month. Additionally, since
the law was made retroactive to 2024, recipients may receive a lump sum benefit
for 2024.
While the Social Security Fairness Act is good news for the
nearly 3 million recipients affected, there is a downside to the new law. It is
now estimated that Social Security will be unable to pay out full benefits six
(6) months earlier than projected (in 2032, 2033 or 2034 depending on whose
projections you believe). Andrew Biggs of the American Enterprise Institute was
recently quoted, “Literally, you cannot find a Social Security expert who
thought the Social Security Fairness Act was a good idea.”
It is clear that the Social Security Fairness Act
exacerbates an already dire situation, but what measures our government will
take to shore up Social Security are still not clear.
To get a better understanding of how the Social Security
Fairness Act impacts your unique financial plan, schedule time to meet with
Bollin Wealth Management soon.
Sources: The Wall Street Journal, Kitces.com