The following article is from the latest edition of LGA’s financial newsletter, “What Would Jeff Do?,” written by Jeffrey Levine, CPA, MST, our Director of Financial Strategies. If you have a general financial question for future newsletters, please submit them to Jeff. Enjoy this article? Subscribe to the newsletter here.
On January 5, 2025, President Biden signed the bipartisan Social Security Fairness Act, removing two long-standing provisions that reduced benefits for many public employees:
- Windfall Elimination Provision (WEP) – This rule previously reduced your Social Security benefit if you had both Social Security-covered employment and a municipal job where Social Security taxes weren’t withheld. The average reduction was about $400 per month. Now eliminated — individuals will receive their full Social Security benefit based on their covered employment history, even if they also receive a public pension.
- Government Pension Offset (GPO) – This provision reduced or eliminated Social Security spousal or survivor benefits for those receiving a public pension. Two-thirds of the pension amount was used to offset the spousal benefit. Now eliminated — spouses and surviving spouses are eligible to collect the full benefit based on their partner’s earnings without any reduction.
The law is retroactive to 2024. As a result, many individuals are now receiving lump sum Social Security payments, often totaling several thousand dollars, to compensate for last year’s benefit reductions. Their monthly benefits have also increased beginning in 2025.
Background on Social Security:
Social Security was established on August 14, 1935, under President Franklin D. Roosevelt. Initially, benefits were not taxable until the 1983 Amendments (under President Reagan) introduced taxes on up to 50% of benefits. In 1993, legislation under President Clinton increased that taxable portion to up to 85%. Today, over 60 million retirees receive benefits, with another 9 million receiving disability payments. It’s important to note that Social Security was never designed to fully replace income—it’s just one piece of your retirement plan.
Jeff’s Recommendations:
If you or someone you know has never applied for Social Security, knowing their benefits would be reduced below zero by either the WEP or the GPO, they should immediately contact Social Security and apply and request information from a representative about collecting their benefits retroactive to January 2024.
When deciding when to begin collecting Social Security, consider:
- Do you need the income now, or can you wait?
- What is your personal financial situation?
- Are you in good health, with a long life expectancy?
- Do you have other income sources that allow for delayed claiming?
- Are you concerned about potential future reductions to the Social Security program?
Your Social Security benefit is based on your highest 35 years of earnings from covered employment. Wages earned before age 60 are indexed to today’s dollars, and the average of your top 35 years determines your benefit.
You can start collecting benefits as early as age 62, but this can reduce your Full Retirement Age (FRA) benefit by about 28%. Waiting until age 70, however, can increase it by up to 32%. FRA varies by birth year, if you were born in 1960 or later, it’s 67.
Spousal Benefits
If you’re married, you may be able to collect up to half of your spouse’s FRA benefit if your own is lower. And if your higher-earning spouse delays collecting until 70 and then passes away, you can inherit that larger benefit.
LGA’s Commitment:
Navigating Social Security decisions, especially amid significant legislative changes, can be complex. At LGA, we’re here to help you understand how these updates impact your unique situation and guide you toward smart, strategic choices.
For personalized advice and to explore the best timing and strategies for collecting your benefits, contact us today. We’re committed to helping you maximize your retirement income with confidence.
