What Retirees Need to Know About The Social Security Fairness Act, #273
The Social Security Fairness Act, which was signed into law at the start of 2025, has been in effect for about nine months since this game-changing legislation repealed both the Windfall Elimination Provision and the Government Pension Offset, restoring and increasing Social Security benefits for millions of retirees, especially teachers and public employees who worked in jobs exempt from Social Security.
In this episode, I discuss exactly who qualifies for these newly restored benefits, explain how the Social Security Administration is handling the rollout, and give you a step-by-step guide on what to do if you haven’t received your payment yet. I’ll also walk you through critical tax changes you’ll need to consider if you’re now receiving this extra income, and practical strategies to avoid any nasty tax surprises at the end of the year.
You will want to hear this episode if you are interested in...
[02:26] Social Security Fairness Act overview and impact.
[05:57] Who is eligible for Windfall Elimination Provision (WEP) or Government Pension Offset (GPO).
[07:35] Applying for your benefits.
[08:16] How much Social Security becomes taxable.
[11:09] Increasing withholding on pensions, IRA, 401(k), or earned income.
What Is the Social Security Fairness Act?
Signed into law by President Biden in January 2025, the Social Security Fairness Act has restored benefits for millions of retirees who were previously penalized due to their employment in jobs that were exempt from Social Security taxes. These roles frequently include teachers and certain municipal or state employees. For years, retirees in those positions received a reduced Social Security benefit due to provisions known as the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO).
Windfall Elimination Provision (WEP): Affected individuals who worked in both Social Security-covered and non-covered jobs, resulting in a reduced Social Security benefit.
Government Pension Offset (GPO): Reduced the spousal or survivor Social Security benefit for those receiving a government pension from non-covered employment (like teachers in Connecticut).
With the repeal of these two provisions, retirees are now eligible to receive their full Social Security benefit, as well as the entirety of their eligible spousal or survivor benefits, regardless of their pension amount.
Who Is Impacted?
The Act primarily benefits retirees who worked in state or municipal jobs excluded from Social Security wage contributions (think teachers, police, firefighters, or other state employees in certain states). It also helps spouses or survivors of such retirees, who, under the GPO, were denied or saw dramatic reductions in their spousal/survivor benefits.
As an example, if a teacher in Connecticut was receiving a $3,000/month pension, they were previously eligible for only a fraction of their spouse’s Social Security survivor benefit. Now, with the Act’s passage, they can receive the full amount, eliminating a significant hardship for many families. The Social Security Administration has processed around 3.1 million payments, exceeding prior estimates, and paid out approximately $17 billion. However, some eligible recipients have yet to see increases, particularly those who never filed because they believed they wouldn’t qualify.
What Should You Do If You’re Eligible?
If you haven’t received a payment adjustment, you might be missing out on thousands of dollars.
File or Re-file: Eligible recipients should visit SSA.gov to update or submit a new application for benefits.
Check Your Status: Even if you’re not currently receiving Social Security, consult the SSA to determine your eligibility for individual, spousal, or survivor benefits—especially once you reach full retirement age (typically between 66-67).
Lots of people have been automatically credited and are receiving retroactive payments, but those who never applied in the first place due to WEP and GPO restrictions must now take proactive steps.
Tax Implications of Increased Social Security Benefits
More income is always welcome, but it may come with new tax responsibilities. Here’s what you need to know:
Social Security Taxation Basics:
Taxability depends on your total income: adjusted gross income (AGI), plus half of your Social Security benefit, plus tax-exempt interest.
Generally, married couples with less than $32,000 combined income owe no tax on Social Security, and between $32,000 and $44,000, up to 50% of benefits may be taxable, then over $44,000, up to 85% of benefits can be taxable. For individuals, the thresholds are $25,000 and $34,000.
Avoid Surprises by adjusting your tax withholding—either by filing IRS Form W-4V for Social Security, or updating withholdings on pensions or retirement accounts. You may also make quarterly estimated payments, especially if you live in a state with income tax.
Social Security does not withhold state income taxes, so plan accordingly to avoid penalties and interest. With these changes, it’s more important than ever to review your retirement plan and tax strategy. Speak to a qualified accountant and financial advisor to ensure you are maximizing your benefits and staying compliant with tax requirements.
Resources Mentioned
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