President Biden Signs Social Security Change with Negative Impact for Retirees
On January 5, President Joe Biden signed the Social Security Fairness Act into law, offering a boost to nearly 3 million public-sector workers with government pensions. These workers will now see an average increase of $360 per month in Social Security benefits. However, the new law also brings concerning implications for the future of Social Security.
The Social Security trust fund that provides benefits to retired workers, spouses, and survivors was already on track to be depleted by 2033, which would result in automatic benefit cuts unless Congress intervened. But the Social Security Fairness Act accelerates this issue by increasing program spending, bringing those cuts closer than expected.
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The Social Security Fairness Act and Its Changes
The new law eliminates two major provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
The WEP previously reduced benefits for individuals who worked in both a non-Social Security taxed job and a job that did pay Social Security taxes, typically affecting public-sector workers like firefighters, police officers, and teachers. It was designed to prevent individuals from receiving excessive benefits if they had limited Social Security coverage.
The GPO, on the other hand, reduced Social Security benefits for spouses and survivors who also received government pensions. It aimed to treat government employees similarly to those in the private sector who pay into Social Security.
While some argue that the WEP and GPO were unfair to public-sector workers and their families, others contend that these provisions were necessary to prevent double-dipping into both government pensions and Social Security.
The Impact on Retired Workers
Before the Social Security Fairness Act, the OASI Trust Fund was projected to run out by 2033, at which point only 79% of scheduled benefits would be available. While this doesn’t mean Social Security will go bankrupt or that benefits will stop, it does mean that unless funding increases, benefits could be cut by 21%.
The Social Security Fairness Act, however, is likely to worsen the situation. While it increases benefits for millions of public-sector workers, it will also accelerate the depletion of the OASI Trust Fund by approximately six months. Additionally, the Congressional Budget Office projects that the necessary benefit cut will rise to 26% once the fund is exhausted.
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In summary, the Social Security Fairness Act accelerates the timeline for benefit cuts and increases the scale of the required cuts. While Congress may eventually address the funding issues, the new law places greater pressure on lawmakers to act quickly.
Maximizing Your Social Security Benefits
For those nearing retirement, there are strategies that can boost Social Security income. Some lesser-known “Social Security secrets” could help you maximize your benefits, potentially increasing your annual payout by as much as $22,924. Learning how to optimize your Social Security benefits could be a key factor in retiring with confidence. To find out more, explore strategies that could enhance your retirement planning.
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