Maximizing Social Security: The Fairness Act's Impact and Strategic Retirement Planning

This episode explores the recent Social Security Fairness Act (HR 82), which eliminates the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) that unfairly reduced benefits for many public servants. Listeners learn about the implications of these changes, how they will receive increased benefits, and the importance of staying informed about Social Security, alongside discussions of the overall sustainability of the Social Security system.

• Review of the Social Security Fairness Act and its implications
• Elimination of the Windfall Elimination Provision and Government Pension Offset
• Explanation of benefits for affected retirees
• Importance of updating personal information with the Social Security Administration
• Discussion on the financial sustainability of Social Security

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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Call 770-980-9262 to speak directly with someone about your retirement planning needs.

https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
Sign up for one of our upcoming events at https://www.masterplanyourretirement.com/events

Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Speaker 1 0:06

Could you receive more from your Social Security benefit than previously expected. Folks, thank you for joining us today. Welcome to Master Plan Retirement Consultants Retirement Roadmap. My name is Evan and with me, as always, retirement Planner Mark Fricks. Mark, we got some big news today.

Speaker 2 0:22

Huge news, something we've been hoping for, wanting for a long, long time. A lot of happy clients, a lot of happy people out there that this can affect, in the millions of folks that this can affect.

Speaker 1 0:32

Absolutely so. The Social Security Fairness Act HR 82, concerns the windfall elimination provision and government pension offset was signed into law on January 5th 2025. Upon implementation, the Social Security Fairness Act eliminates the reduction of Social Security benefits while entitled to public pensions from work not covered by Social Security. What does that mean? What does that mean?

Speaker 2 0:57

I was just going to ask you this yeah, so let's dig into that just a little bit to see who this affects, okay, and if it affects, affects you again, go buy your steak dinner or something, because this is great. So basically let's say, let's take me as an example. Let's say I worked for 15 years in corporate America, okay, and paid into social security for 15 years, and then I turned around and went to work for a city or county that does not pay into Social Security. So you would think I would get 15 years of credit and receive that kind of a check from Social Security. Not so fast, my friend. Basically because of the windfall elimination provision, which has been around since the 80s, if I remember correctly.

Speaker 2 1:40

Some people in Congress felt like you guys are double dipping. Totally incorrect, you are not double dipping. You were getting what was fair from corporate America. You were not getting any social security because of the government job, because they paid into a pension, not social security, but at least that 15 years. Well, because they were thinking you were getting too much money as a firefighter, as a police officer, as a school teacher. Then they said, well, we're going to reduce those 15 years or the amount of money for those 15 years and you're talking about in 2024, up to I think it's in my notes up to $578 per month was the maximum you could lose from your social security. Six grand a year. Okay, and this affects a lot of our clients. We work with a lot of school teachers and government workers and things of that nature and it's always this is the problem. They didn't know it affected them in most cases, because it does not show up in your social security statement. You say, hey, when I retire I'm going to get $2,000 a month. No, when you turn it on or call them, they're like well, you are subject to WEP Windfall Elimination Provision, so you're going to get less. So that has been done away with.

Speaker 2 2:49

Also, you mentioned the government pension offset. This is the same set of rules, only it's for the widow or widower of that person. So if you want to collect a survivor benefit, it's going to be cut by the same amount of money as well. So you can imagine this widow who's lost her firefighter husband or whatever and now she's not going to get what they thought they would get and if Social Security misses it and two years later they find it, you could get two years of money owed back to Social Security. So that's the bad part.

Speaker 2 3:20

It was a bad law. We've always told our clients it was not fair. We've talked to other people, we've talked to other people, we've talked to lobbyists, we've talked to people in Congress and whatever, and they've been talking about it for a couple of years, but finally they kind of got on the they crossed the aisle, so to speak. This was a bipartisan bill Democrats and Republicans. It passed fairly easily and was just signed into law. So what this does is it's going to.

Speaker 2 3:45

All these folks that have been getting two, three, five hundred dollars less per month will start getting that money, probably the next couple of months. I'm not sure when people will be watching this, but an early 2025 is when they'll start getting that extra money. I don't know the exact date. They're still working out some of the details and how they're going to make all these adjustments and the computer calculations and the checks that are going into your checking account. But this will happen and, more good news, if this affected you in the year 2024, whether it was for three months or going all the way back to 1998, it doesn't matter but for the year 2024, they're going to give you a lump sum of that amount of money. So you could be getting four or five $6,000 as a lump sum, retro back to January 1st of 2024. So we can help fund your Roth with that or something Absolutely so again great news. So we're going to dig into this a little bit more, but just kind of want you to know up front what's happening here.

Speaker 1 4:45

Yeah, and you know, as you mentioned, this is still very early. This was just signed into law. So even the Social Security website even says that the Social Security Administration is evaluating how to implement the act. That's what the site actually says as of today.

Speaker 2 5:00

They're in meetings today.

Speaker 1 5:01

They're still working on how that's going to roll out. But again, you know can't reiterate enough what a relief this is. It's always good. I feel like oftentimes we're sharing news. How to prepare for this? Look out for this. We've got this coming out that you know we have to be careful and plan around. It's good to share some uplifting news and you know, especially in the state of the world and everything these days politically is so volatile, it's nice to see the crossing of the aisles for things that genuinely help yeah.

Speaker 2 5:29

And President Biden is the one that signed into law. Trump was also for it. So again, this was a collective effort. I'm not sure if Trump called some members of Congress beforehand, I'm not sure what all went on behind the scenes, but it's been again. It's been reduced a couple of times over the last few years, but finally it got done.

Speaker 2 5:46

And again it's always been an unfair bill. You paid in that money. You should get the a hundred percent of what you deserve for them to whack some of that off, because you're double dipping, which is totally incorrect. And again, this affects people, middle-class. This affects people that work for us civil servants, policemen, firemen, people that put their lives on the line school teachers educating our children, city workers, county workers and again, not every city, not every county, just the ones that opted out of putting into social security, thinking we'll put that extra money into your pension, and yeah, so the pension might've been a little bit larger, but again, if you put in work somewhere else and paid into social security, it's yours. And again you will get money going back one year. And if it takes them two or three months to implement it, you'll get January, february and March if it hasn't been increased yet. So again a nice lump sum check, along with increased monthly benefits.

Speaker 1 6:43

And, like you said previously, it's shocking how few people realize they're affected by WEP Windfall Elimination Provision. How oftentimes we meet clients or even folks at the seminar if we're teaching on social security or something related, have no idea that they've been working in a county. If a teacher, they can move counties and maybe one county pays into it, one doesn't. And, like Mark said, it's not reflected on your social security statement. It's only reflected once you begin taking it.

Speaker 2 7:12

Yeah, a lot of times the system or the county doesn't even tell you. They just you know, if you don't look at your check, you may not know what's happening. Hey, they're not deducting for FICA or Social Security and so you're in the dark. And even if they do tell you, you typically don't understand the ramifications of that. How many times have we sat in meetings, evan, and we're in front of somebody that this affects and we do the calculations and we say this is really what you're getting.

Speaker 2 7:41

That income gap's a little wider than we thought it was. It is so this is going to again. Now they can dip maybe less into their IRAs. Save that money for future. There's so much they can do. It's huge.

Speaker 1 7:54

Yeah, and like you said too, to reiterate, most of the people who are affected by it are our civil servants, are people who are not compensated that well for their job, Like you said teachers, policemen, firemen, things of that nature. So really glad to see that this is being done away with and we can move forward and let's hope for some more good news as 2025 continues on. It's a great way to start.

Future of Social Security Benefits

Speaker 2 8:16

That's right Now. So some of the questions we've gotten already, some of them from someone here in our office that is affected by this because her husband's a fireman. A couple of the questions that they had was, first of all, how do you you know if we were taking Social Security? How would we apply for this? How would we get rid of that surcharge? You don't do anything, ok, just make sure that Social security has your current address and current banking information. You can change that or check that on the ssagov website. Log in and make sure everything's correct and it will automatically begin when they get those numbers correct and they get it all put together. So nothing you need to do at that point.

Speaker 2 9:02

A couple of other things is can this be changed back in the future? Well, the bad news is is every law is written in pencil, right? So I can't predict the future, but I tell you it'd be hard to imagine somebody coming back in in 10 years and changing this back. I don't see that happening. Even if it did, I think there might be some kind of a grandfather like okay, if you're already taking it, when're not going to affect you, but I hope not. I mean, that would be just as almost like a stab in the back. They would do that.

Speaker 1 9:30

Well, that opens up the broader conversation about Social Security solvency in general, but we'll get to that in a minute. Do you think, mark, are there still industry workers that this bill did not impact or that should be mindful of how their job can impact the future Social Security benefits?

Speaker 2 9:46

I'm not aware of any. I mean, we'll certainly do some more research and bring it to your attention, but I'm not aware. Those are the WEP and the GPO were the two big sores in Social Security that really needed to be bandaged and healed, that's a good way to put that, but thankfully we don't have graphics anywhere because they're near all that. But yeah, I don't see anything. Kevin, I'm not aware of anything and of course we will be some of the first to know and we'll bring it to everyone's attention. But I think everything else is pretty much fair.

Speaker 1 10:19

Well, if there is an episode part two, hopefully it's more good news. But yeah, the devil's more good news. But yeah, the devil's in the details. As we mentioned, it's still very early. Social Security is still figuring out how to implement it to begin with, but we're looking at the early news as good news.

Speaker 2 10:34

Yep, absolutely, and again, there's nothing you really need to have to do. Those of you that are working with someone whether it be us or whether you're thinking about working with someone needs to be aware of what's going on. You need to make sure that who you're working with is not only a fiduciary, but is also someone that understands social security, the rules, because there's still a lot of complicated rules in social security. You know what if you get divorced? What if your spouse dies? When should you turn it on? That's part of what we do, and one way to find out more about that is to visit our website, masterplanretirecom. Why? Well, number one, there's a neat little green button there that says schedule a meeting, and what that is designed to do for folks that have not seen us before is to take advantage of the complimentary consultation. Not seen us before is to take advantage of the complimentary consultation. Sit down with us, share your concerns, your goals, your fears, your financial situation a little bit. Let's kind of see where you stand, and then that will lead to a second complimentary consultation where our staff and Evan and I will run a series of reports to see where you stand from a standpoint of running out of money.

Speaker 2 11:44

I mean, that's the number one concern, right? And so what if taxes go up, which they may or may not, which I think in the future they eventually will? What if I lose my spouse? What if I have a serious illness or long-term care need? Again, six, seven, eight, we can run a Social Security maximization report. Again, when should you turn it on? Do you turn it on at age 66 and eight months, because that's your full retirement age? Probably not right. If you're a couple, maybe one turns it on at one point, one turns it on at the other. So these reports will help you see where you're at, so that we can show you how to fix those areas that are broken. Okay, so again, masterplanretirecom, or hey, give usa phone call 770-980-9262.

Speaker 2 12:29

Option two, if you want to be a little more specific, to schedule that meeting. It can be Zoom, it could be a phone call, it can be face-to-face. We're here in the Atlanta area. We also have some regional offices as well. So get the schedule. Let that be maybe your news resolution, because these kinds of things are changing all the time, so you can't just set it and forget it either. You really need to, and there's so much to know I mean even you, evan, and I, sitting here, we're constantly having to read and update our knowledge because you think you get it down, it's going to change.

Speaker 1 13:01

This episode is a perfect example. So let's look at the big picture now. If I wanted to be a pessimist in this conversation, I'd say so. Social Security is just paying out more money and we're dwindling down our trust fund even more. How long is Social Security going to last?

Speaker 2 13:21

So let's first of all describe what's happening with social security. Okay, so basically, social security is not going to stop in 2030. I think it's not 2035, yeah, I can't remember. I think that's what I read recently. Um, that's when the trust fund could be broke.

Speaker 2 13:35

So social security is being funded two ways right now. Number one, out of these people that are working out of their paycheck right uh, six and a half percent from the employee, six and a half percent from the employer and that goes into your social security bucket, so to speak. The rest of all these checks that are being written for social security, they're taking money out of the savings account. It's called a trust fund. It built up years ago when we had more employees working. Now that has dwindled compared to the number of people retired, and so there's not enough taxes being paid in to cover those checks. So that money is coming out of the trust fund. They expect the trust fund to be broke in 20, again, I think it's 2035 and that number could change. So when that happens they'll still have taxes coming in. So they're estimating about 77% of your check would be covered. So if they do nothing, then technically you could get a 23% pay cut from Social Security in 2035. Now I really believe they're going to do some things. There's a lot of ideas on the table, some good, some bad. That's always is right. As far as the effect of this new rule, they're going to be paying out more money over the next 11 years or so until 2035, 10 years now and so they're estimating it will accelerate the trust fund being broke. I've read it by about six months, so you're talking about 2034 and a half or whatever. So it's really not a major impact. It sounds like a lot of money. It is a lot of money. It's a lot of people affected.

Speaker 2 15:14

But again, some of the measures they're talking about in fixing Social Security we've had shows about this before are things like maybe raising the full retirement age to age 70. When Social Security first came out, it was 65. Life expectancy was 63. So that needs to be raised Now. It wouldn't affect people my age, it might affect people's age, okay, but it's kind of like the last time they raised the age, they did it over a series of years. We're living longer, so that probably needs to be stretched out. Maybe they raise taxes on social security. Maybe they tax your benefits more. Maybe the person working, feeding Social Security pays more in taxes. Maybe they change the formula for cost of living increases so the increases are less. So again, there's some good things that they can do, there's some bad things they can do, and there's some other ideas on the table as well.

Speaker 1 16:04

Yeah, it's kind of the domino effect right now, isn't it? When you're looking at what could or couldn't happen, what may happen, what will be written into place. We look at our national debt, we look at our government spending. That money is going to come from somewhere, and where does it typically come from? We know a lot of people like to pay taxes on that or a lot of politicians like to sign that into law. But how does that work into an overall retirement plan? Because now we're looking at, okay, social security. Will it be affected? If it is not, where's that coming out of? And is that going to raise our taxes on our income plan in retirement?

Speaker 2 16:42

Again, that's why we run the what ifs. Any retirement roadmap, that's what we call. That lifelong retirement plan, so to speak is flexible, so it's not set in stone. We update it every year at least with our clients to make sure what has happened in your life. You need more income, have your taxes gone up because you inherited an IRA, Whatever? There's a hundred different things that could affect your plan, so we adjust it every year based on your needs, based on changes in tax law or social security law, whatever it may be.

Speaker 2 17:18

Just like these clients that are going to benefit from for well being done away with and GPO being done away with, they will probably be able to take less money out of their assets, have more money for a longer life, more money for health care, more money just to leave their kids and grandkids. So that's a positive change we'll begin making over the next year. But, yeah, that's why. That's why we run all these what-if reports we mentioned earlier. Masterplanretirecom Schedule a complimentary consultation and let's look at all the various scenarios that could affect you. And also, how can we make your money more efficient? How can we make your income more efficient to have more money coming into your pocket? So there's so many different areas to look at. People don't realize even the people that come to see us until they've met with us a couple of times how many moving pieces there are and how every one of them affects most of the others.

Speaker 1 18:09

Yeah, I mean, social security is such a great topic because a lot of it has simplified over the years in a lot of ways. However, there are so many gotchas in everything People who decide to retire early and go back to work, depending on what age they are. They could owe money back if they're taking social security and make too much that year, things of that nature. But it's so important to look at your income, your assets. Which ones are income producing? Do you have any that are income producing currently for retirement? How does that fit in with social security? Do you need to create some income producing assets from your retirement accounts?

Strategic Retirement Income Planning

Speaker 1 18:46

Everyone's situation is different. Everyone's situation is unique. We like to say you know, we don't have plans on our bookshelf A through Z. I think you're a plan D. Let's pull that one down for you. Everything is different. Every person's situation is different. Everyone's emotions and perspectives are different, even among spouses sometimes. And so you really have to. We get to know our clients on that deeper level before we start making financial decisions and have that conversation with our clients it down, because I really liked it.

Speaker 2 19:17

You don't retire on your nest egg. You retire on the income it can produce, and so that's great if you've saved a lot of money in the IRA. But are you going to be able to take 3% out a year? 4% Maybe, if you do? The right thing, which we incorporate, is maybe you maximize and take 5% or 6% out every year, that's double the income of 3% and it's guaranteed for life. So that's just an example. I love that saying, by the way. But just give you an example.

Speaker 2 19:48

We're talking a little bit about Social Security, so it's not as simple as just saying I'm going to turn it on when I retire, at whatever age. Like you said, you could be penalized if you go back to work. But what about this? If you take into account that we feel like taxes are going to go up, it could be in one year if the tax cuts expire. With a Republican in both the Congress and the House and a Republican in the presidency, we think they're going to extend that or make it permanent. But you've got future Congresses, you've got future presidents that can raise taxes again with us being so far in debt.

Speaker 2 20:23

So one of the things we do. As an example, okay is maybe, instead of turning on your social security, take money from IRA while taxes are still low. Let your social security grow, because it's going to grow by 8% a year from age 67 to 70. That's guaranteed An 8% bigger check if you wait three more years, so that's 24% larger check and you've gotten rid of some of your tax-qualified money that's going to be taxable in the future, for the next 30 years or whatever. Just a very simple example of being strategic about your income and how to take it, when to take it, where to take it from, how is it taxed, and also based on your needs and based on what's happening in the economy and the world.

Speaker 1 21:03

Yeah, yeah, it's so complicated. That's what keeps this interesting, honestly. That's what keeps our job interesting. There are so many strategies at play at once. When you're working, you've got 30 years of a career, you're in the accumulation phase and, as we like to say, your 401k whatever has that one job and that's to grow. Once you are preparing for retirement 15, 10, 5 years out, you're preparing for the decumulation phase, Retirements we're living longer. Now People can live 25, 30 years in retirement.

Speaker 2 21:32

Especially if you're a couple, at least one of them.

Speaker 1 21:34

Especially if you're a couple, and that brings all new issues with spouses and long-term care needs and things like that. People are living longer, Retirement's longer. The first thing that we have to make sure that we cover with our clients is will your money last through retirement?

Speaker 2 21:53

Yeah, and we want to make sure that happens for sure.

Speaker 1 21:54

And that income plan is the first approach, which is why Social Security is a big deal and this new windfall Elimination Provision elimination is the Social Security Fairness Act.

Speaker 2 22:07

HR 82. That's what it is.

Speaker 1 22:08

If you want to look it up, that's what I'll refer to it as from now on by mistake, but it's huge and again we're so thankful for that. But we'll keep in line with this. We'll keep you guys updated as well if anything new comes out about that, once we hear how Social Security plans on implementing it as well.

Speaker 2 22:25

Yep, you know I'm talking about all these intricacies. I love it when we either it's a new client or it's a client that calls us up to ask advice about where to get some money from or income or whatever We'll give them an idea and say this is, I think, what's best, because we've done it a million times. And they'll go wow, I hadn't thought about that. Yeah, that makes sense, yeah, that's what you know, and so it's just so many different ways you can do it, and that's why I just can't believe people would just, you know, heard a saying I think you heard it the same time I did from a colleague that said when's the last time you did something complicated for the very first time and got it completely right? Yeah Well, you're doing retirement for the very first time. You think you're going to get it completely right? Okay, how many mistakes will you make out of the hundred decisions you need to be making Now?

Speaker 2 23:15

You can set your compass on west and head toward the land of retirement, and you'll probably get there, but it's going to cost you more money, more taxes, more detours, more heartache, more stress. Or you can have a roadmap, a flexible roadmap that takes into account all the obstacles you can come across and have a peace of mind in retirement. That's the most important thing that we try to deliver anyway, don't just take the trip, plan for it. All right, have a map, have a plan. I mean, gosh, people spend more time planning their vacations than they do their retirement. That's the common statistic we've heard. Anyway, but a great show, great news today. Glad we were able to share that with you. So any parting thoughts? That's it for me, mark. All right, well, until we see each other again, remember, plan well and prosper, take care.

Speaker 4 24:01

This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to masterplanretirecom or call 770-980-9262. Thanks for listening and remember plan well and prosper.

Speaker 3 24:20

All matters discussed during this show are for informational purposes only too. Thanks for listening and remember plan well and prosper. Advisory services offered by MasterPlan Retirement Consultants, a registered investment advisor in the state of Georgia. Mark Frick's MasterPlan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.