Social Security Fairness Act 101

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Today's topic is the Social Security Fairness Act. Hello and welcome to Money Talks. My name is Ken from Summit Financial Consulting. If you'd like more information about what you hear during our show, give us a call at 586-226-2100 or visit us on our website, www.summitfc.net. When you're at the website, be sure to check out the radio page and check out our past shows. You can also subscribe to us on Apple Podcasts, Spotify, or Amazon Music. So the Social Security Fairness Act was signed into law by President Biden in January of this year, right before he left office. And it's been one of the biggest financial news stories of 2025 so far. And as you'd expect from a big piece of federal legislation, it's definitely a bit complicated. There are clear benefits for some people and a little bit of uncertainty for others. So if you're nearing retirement, any new Social Security legislation or changes to the rules, it's big news and something that you probably want to understand and figure out if it applies to you. So during today's show, we're going to walk through the Social Security Fairness Act to get a sense of what it might mean for you. But before we jump into that topic, let me introduce Tony, who loves podcasts almost as much as I love March Madness.

Oh, wow. You're a big March Madness fan, huh?

I'm inside a bracket challenge, and there was 135 people that signed up, and I'm in first place and second place right now. I filled out two brackets. Oh, wow. I'm just sitting here with three games left. So now I've got the tough decision of do I want to hedge the

Um, I don't know it, boy, you've made it this far. A lot of people's brackets got busted right away. So, um, that's pretty good. Although all four teams that made it to the final four are, were number one seeds, right?

Yeah, I picked Michigan State to win on Sunday, originally, with my team losing. I don't think I was being too much of a homer bias.

I saw some other people that did the same thing, but that was the only... I was rooting for Michigan State, I'll tell you that. I really was. I watched that game where they destroyed in the second half. Who was that that they destroyed in the second half?

New Mexico, maybe?

Yeah, boy. Yeah, that was good. They had some good second halves, but I thought they would go further, but they didn't quite make it, did they?

No, it was still a great season. They were predicted to finish in the middle of the Big Ten. So we're all happy. It was a great season. Izzo pulled a rabbit out of a hat again. So we're all looking forward to next year.

Exactly. Well, you know, I do love my job. I love doing podcasts. You're right. But probably, I don't know, your love for March Madness is... basketball is pretty great. But college basketball is so much more exciting to watch. My wife and I, for the first time, have really gotten into it, and we've been watching the game. So, yeah, it's a lot of fun. The energy level is, I think, better than the pros, really.

Yeah, my dad always complains the pros don't play until the last five minutes.

Right. Yep. Yep. That's what I say, too. Exactly. So I'm glad you pulled this out of the news to take a closer look at it. The Social Security Fairness Act. What is this all about?

Yeah, well, first, just a little bit of history. So the original Social Security Act was signed into law in 1935 by President Franklin Roosevelt. And it was intended to be a safety net to help provide income for older Americans and disabled people. And it's funded by payroll tax contributions, both from employees and from employers. A provision was added, though, in the 1970s that barred public service workers who were already getting a pension from receiving Social Security. So the big change here is that in 2025, the Social Security Administration is now going to adjust benefits so that 3 million Americans will potentially get more Social Security. And it's a big job sort of reworking this 1970s rule and they've got a lot of work to do in terms of figuring out retroactive payments and future benefits. So there's a lot of moving parts to this thing.

Yeah, well, there are and there always is, especially when it's complicated legislation that has anything to do with Social Security, Medicare taxes. And it sounds like, though, this is a major shift for the program, right? I mean, what are we talking about here, Ken, in terms of dollars and cents?

Yeah, great question. So it's anticipated that the new law is going to trigger a benefit change of about $360 per recipient that it applies to. And people are also going to get a lump sum payment for 2024. So it was sort of a retroactive rule that went into effect. So it not only benefits people in 2025 going forward, but it also benefits them in 2024. So your average person's actually going to get a check for thousands of dollars from social security eventually. So right now you're probably saying to yourself, you know, this has to be a little bit complicated and you're right. Sure. The people who qualify for these benefits, it may actually take up to a year or even longer for all these payments to come in. So it's going to take a while, but the wheels are in motion.

Yeah. Wow. Well, and yeah, I mean, it's already been delayed. That's a classic, right? Yeah.

Classic government. Yeah. Right out of the bat. Already already behind schedule. Sure.

Yeah. Well, the Social Security Administration's in the news right now. I mean, they just cut they're cutting seven thousand jobs. Of course, that's out of fifty seven thousand. So hopefully they were needed cuts and not crucial because, you know, there are delays in the system.

Right. Yeah. And they've actually had a hiring freeze since 2023. So they're definitely trying to trim there. And now they've got this big task in front of them of trying to recalculate all the previous benefits and all the current benefits. And they anticipate it's going to affect 3 million people. So about 10% of Social Security recipients will see some changes from this. So here's one problem that we ran into is that when they created it, they did not create any funding to actually implement it. So they forgot that part. They said, OK, let's do this. But then they didn't do anything to fund the payroll necessary to actually get this thing going. So anyone who stopped by a Social Security office in recent years knows that the staff is typically stretched pretty thin, getting an appointment in the office. Takes weeks, if not months.

Yeah.

So, you know, processing this complicated legislation, it's going to be time consuming. But they are in the process of developing procedures and they're trying to use as much in the way of automated solutions as possible to compute the retroactive benefits. So we don't want people sitting around with with a pencil and a sheet of paper trying to get to the bottom of this.

No. And you have software that you can run for people. Right. The Social Security maximization report that you take some of the personal data and put it in there and it does like over 20,000 calculations. And then it can figure out exactly where that sweet spot is based on your situation or you and your spouse's situation. Right.

Yeah, that's right. Yeah, we love to use that software. We don't charge anything to run a social security maximization report for someone. So we'd be happy to have anyone reach out to get a complimentary report and it will take into effect all of these new changes. So just call it 586-226-2100 if you'd like to learn a little bit more about that.

All right. What's that number one more time slowed down? 586-226-2100. You know that number too well. You rattled it off so quick. So what's next?

So now we talked about the delays. Let's talk about some of the details. So the Social Security Fairness Act repealed two pieces of legislation. So one is called the Government Pension Offset or the GPO, and that was enacted in 1977. And then there was a second act, the Windfall Elimination Provision, which we'll abbreviate with WEP. That was enacted in 1983. So the WEP reduced Social Security benefits for workers who receive pensions that were not covered by Social Security. The GPO is similar to the to the WEP, with the exception that that affects spouses and survivors. So those are the two pieces of legislation that effectively reduced Social Security benefits if someone was already getting a government pension.

I'll admit I'm not familiar with the GPO, but I remember when the WEP or WEP, the windfall elimination was enacted because they said it wasn't fair that people were getting pensions and able to collect full Social Security, which is crazy because... It is fair because they earned the Social Security. They paid into the system. They should get as much as everybody else who paid in that same amount. So I'm glad that they eliminated it. And it's a classic government move once again. So our government has eliminated the elimination provision.

You got it.

They eliminated the elimination provision. So between these two, the GPO and the WEP, how many Americans have been impacted then, Ken? Yeah.

So this covers teachers, firefighters, cops, postal workers, along with their spouses and potentially beneficiaries, dependents. We estimate it's about 3 million former public service workers that will have their Social Security affected. So the logic behind the two provisions originally was that if you're getting a government pension, maybe you don't need as much Social Security. Right. Um, but again, that to sort of play both sides of it, um, there's definitely a group of people who are a little bit upset that this is happening. So, you know, I mentioned earlier, it's affecting about 10% of people, but 90% of people, it, you know, they are not public employees, so it won't affect them. Some public employees are, did not contribute as much to Social Security as a regular worker. So it certainly depends on on the details.

Yeah. I mean, teachers, a lot of teachers work private sector jobs during the summer's summer breaks or during that three month period when they're not teaching school. And a lot of people who work for the government. In fact, I have relatives that are currently working for the government. But the first half of their career, maybe 20 years, they worked in the private sector for 20 years. Then the last 10 or 15, they've worked for the government. Well, I mean, they work 20 years. They should get that full Social Security. I don't think there's much argument against it, to be honest. Right.

The only thing someone could really bellyache about is just that Social Security is supposed to run out of money in about 10 years or less. Yeah. So, you know, if it's already underfunded and sort of going on fumes. Why add to it?

So this is this is accelerated this this move eliminating the elimination provision is accelerating that. But this isn't you know, they're two separate issues. So what they have to do is deal with that. And they haven't dealt with that. This this is different. This should have been done, I think, in my opinion. However. Because all those public sector employees, cops, fire people, teachers, plus government workers. However, they need to shore up Social Security, and there are ways they can do that. They could raise the minimum wage. the full retiring age, they could eliminate the, you only have to pay Social Security tax as you work on up to so much money, like $174,000, right? And then any money made over that doesn't pay into social security. So you got guys making, you know, the billionaires out there, if they're taxable income in one year, if their taxable income in one year is, say, $5 million, they're only paying into Social Security at $174. I think that alone could really help. But there are things they can do, right? And they've just been kicking that can down the road.

Yeah, it's a shame the politicians haven't addressed it head on. So you just mentioned a great one, getting rid of that limit on Social Security contributions. Every client that I talk to that makes over that amount, they're always like, oh, I forgot about like they weren't planning on that money at what, you know, it. for them to just keep paying Social Security wouldn't, wouldn't rock the boat.

And if you could, I really don't think so. I mean, if you're making, yeah, I mean, I mean, yeah, it really, it's going to be a nominal difference if you're making say 200 or 250,000 a year. But for those people who are making, you know, tens of millions of dollars a year in taxable income or, or in income from an employer, and there are those out there, yeah, I think they should be paying into Social Security. That's easy for me to say because I don't make tens of, you know, radio show co-hosts, Ken, you know. But still, I don't think they would notice that, and it would do a lot. They probably will have to raise, but I don't think people, our listeners out there who are close to retirement age or in retirement, I don't think they need to worry about Social Security because, you know, There will be changes made, but probably changes that won't affect them personally. Right. Right. Yeah. My son, my kids will be affected.

Yeah. So they, I mean, there's a lot of tools in their toolbox that they could use. So they could increase the full retirement age, you know, make it 68 or 69 for the younger generations. They could increase the social security tax right now. So the last number that I saw is that if they just raised the social security tax 2%, so 1% for employees and 1% for employers within the next year or two, if they did that, that would basically keep social security on. Social Security is always going to be there as long as there's one person working in the United States.

Yeah, exactly. As long as people are working and getting paychecks, Social Security will be there. It's just the reserve has been depleted and they need to build that back up. And they need to be able to pay the full amounts to everyone. And without that reserve, they're saying we can't pay the full amounts that we're going to be needing as more and more people turn retirement age every day. 11,200 people a day in the United States are turning 65. So and therefore, 62 as well. So I think that's a huge, huge number that they have to deal with. But you're right. They could make little fixes. Why they haven't done that already and shorted up. God bless the government, right? Yeah.

If they do wait all the way until the last minute, then they'd have to raise the Social Security tax somewhere between four and five percent total. So just an ounce of prevention here, Tony, would make a really big difference for keeping Social Security afloat. But in the meantime, you know, it's the Americans that are probably struggling with inflation. Having this little shot in the arm of extra Social Security money will will help those public service employees.

Yeah, I think that's great, Ken. And I'm glad we're talking about this. A lot of people don't understand what's going on. Maybe they've heard bits and pieces. And I know that you're offering our listeners out there that Social Security maximization report. If they set up a no charge, no obligation consultation with you, they can come in, get the report run. You can answer their questions. Is there anything else you want to add today on this topic?

No. Just a reminder that it primarily affects state and local government employees. Previous public service workers, especially spouses or survivors, if they're younger, could see some big benefits from it. But other than that, it is a complicated subject. Retirement is a complicated subject. Everything that's going on in the world right now with tariffs and the stock market and retirement income planning are all pretty complicated. So Anyone that would like a no-cost meeting or a no-cost report on Social Security or a no-cost retirement income analysis, we'd be happy to help them out. They could give us a call at 586-226-2100 or go to our website at www.summitfc.net and we'd be happy to put together a plan for them. It's our goal to help. help make retirement a reality. Everyone's working so hard these days. We want to help them get what they deserve.

That's great. And it's a great website, summitfc.net, right? You got it. All right. Well, hey, thank you so much, Ken. And listeners, thanks for tuning in. Also, I want to mention, we're going to be on video soon on our own YouTube. Ken, you're going to have your own YouTube channel there for Money Talks. So I think that's awesome. And we're going to do a whole show on Social Security maximization coming up, aren't we? We are looking forward. That's that's great. You're going to bring the wisdom, a lot of information that our listeners out there need to know. If you haven't filed for Social Security yet, don't miss that show. It'll be coming up and that one will be on video. So that'll be exciting. Thanks for tuning in. And that does it for today's episode of Money Talks with Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit summitfc.net. Join us again soon for another episode of Money Talks.