The Social Security Fairness Act: A Peterson Wealth Perspective

The Social Security Fairness Act: A Peterson Wealth Perspective – (0:00)

Carson Johnson: Welcome, everyone!

Thank you all for joining. We’ll give it just a minute for everyone to hop on.

For those who don’t know me, my name is Carson Johnson. I’m one of the lead financial advisors here at Peterson Wealth. I have to commend you all for taking the time to join. Attending a webinar about Social Security on a Wednesday afternoon isn’t the easiest choice, so I really appreciate you being here.

I want to start today’s webinar with a quick story about someone close to me—my wife’s grandfather. He dedicated his career to the postal service, worked hard, and built a life he’s very proud of. Sadly, a few years ago, his wife passed away. When he contacted Social Security to understand what benefits he was eligible for, he was shocked to learn that he wasn’t entitled to anything.

The reason? A provision called the Government Pension Offset—one of the rules we’ll be discussing today as we break down the Social Security Fairness Act. The good news is that with this new law now in place, stories like his will have a very different outcome. That’s why I’m excited to dive in and discuss what this law means and how it will impact many retirees.

Before we get started, just a couple of quick reminders:

• If you have any questions, feel free to use the Q&A feature in your Zoom application. My colleague, Zach Swenson, one of our Certified Financial Planners, will be monitoring questions. We’ll also leave time at the end for a Q&A session.
• At the end of the webinar, there will be a short survey. We’d really appreciate it if you could fill it out and provide feedback, including any topics you’d like us to cover in future discussions.
• If you know someone who may be affected by the Social Security Fairness Act, please share this webinar with them. It could be an invaluable resource in helping them understand these upcoming changes.

Here’s an outline of what we’ll be covering today. The value of Social Security planning in retirement. An overview of the Social Security Fairness Act and why it’s such a big deal. A breakdown of two key provisions: the Windfall Elimination Provision and the Government Pension Offset. And key takeaways and financial planning strategies for those affected by this law.

Understanding The Value Of Social Security – (3:14)

To start, it’s important to recognize the significant role Social Security plays in retirement planning—especially now, with this new legislation.

As a financial advisor, I’ve worked with many retirees, and I’ve found that some tend to underestimate the true value of Social Security. However, according to a recent survey, Social Security accounts for nearly 40% of retirement income across the U.S. That makes it a foundational piece of a retirement income plan.

I want to highlight three key benefits Social Security provides to retirees.

1. Income You Can’t Outlive

Social Security is one of the few income sources that lasts your entire lifetime. In fact, if you’re married, it can also provide benefits for your spouse.

To put this into perspective:

• If your monthly Social Security benefit today is $2,000 and you live 10 more years, you will receive approximately $262,793 in lifetime benefits.
• If you live 20 more years, that amount grows to $583,137.
• If you live 30 more years, your lifetime benefits could reach nearly $1 million ($973,634).

It’s always eye-opening for people when they see just how much income Social Security can provide over their lifetime.

2. Inflation-Adjusted Income

Another major advantage is that Social Security adjusts for inflation. Inflation is one of the biggest risks retirees face, often impacting retirement income more than market downturns.

To illustrate this:

• If your $2,000 monthly benefit grows with even conservative inflation adjustments, in 10 years, it could be about $2,438.
• In 20 years, it may rise to $2,972.
• In 30 years, that benefit could increase to $3,623.

These inflation adjustments help ensure that Social Security remains a reliable source of income as the cost of living rises.

3. A Safety Net for Your Family

Finally, Social Security isn’t just for you—it provides a safety net for your family as well. This includes benefits for:

• Spouses
• Widows/Widowers
• Dependent children
• Divorced spouses (if they meet certain conditions)
• Divorced spouses of deceased Social Security recipients

Since these benefits extend beyond the individual retiree, Social Security plays a crucial role in ensuring financial security for families. Now that we’ve laid the groundwork for why Social Security is so important, let’s dive into the Social Security Fairness Act and what it means for retirees.

Now, many of you may already be claiming Social Security, so this next part may not apply to you. However, for those who haven’t yet applied—possibly because you’ve been affected by benefit reductions—we’ll briefly discuss some key factors to consider when deciding when to start your benefits.

Some important factors include:

• Health status and life expectancy – Do you have a family history of longevity? If so, this could influence your decision.
• Need for income – How much income do you need at the start of retirement? Your financial situation may determine whether it makes sense to claim benefits early or delay them.
• Work plans – If you plan to continue working while claiming Social Security before reaching full retirement age (FRA) (which is between 66 and 67, depending on your birth year), it could impact your benefits.
• Survivor needs – If you’re married, your decision could affect your spouse’s future financial security.

Deciding when to apply for Social Security is one of the most important—and often most complicated—choices retirees face. The right decision can make a difference of hundreds of thousands of dollars over your lifetime. That’s why it’s worth taking the time to develop a solid Social Security plan and maximize your benefits.

Does This Affect You? – (8:07)

Before diving into the details of the Social Security Fairness Act, many of you may be wondering: Does this legislation apply to me? Some of you may have joined today’s webinar just to get that one question answered—so let’s address it upfront.

I’ve created a simple three-question test to help determine if this law impacts you. If you meet all three criteria below, this law likely applies to you.

1. Did you work a job that did not pay into Social Security?

This means Social Security taxes were not withheld from your paycheck. This is common for:

• Teachers in certain states
• Police officers
• Firefighters
• Other government employees

2. Do you receive a pension from a job that did not pay into Social Security?

If you are currently receiving a pension based on earnings from a job that did not contribute to Social Security, this law may impact you.

3. Are you eligible for a Social Security benefit?

You may be eligible if:

• You worked another job that did pay into Social Security (earning at least 40 credits, or 10 years of covered work).
• You qualify for spousal or survivor benefits based on someone else’s work history.

If you meet all three criteria, the Social Security Fairness Act is likely good news for you. On the other hand, if you’ve always had Social Security taxes withheld from your paycheck, this law won’t impact your benefits. But for those it does apply to, the changes we’ll discuss today are extremely important.

Now that we understand the importance of Social Security and who this law applies to, let’s answer the big question:

The Social Security Fairness Act – (11:22)

The Social Security Fairness Act was signed into law on January 5, 2025. At its core, this law is very simple—it repeals two rules that have significantly reduced or eliminated Social Security benefits for certain retirees:

1. The Windfall Elimination Provision (WEP)
2. The Government Pension Offset (GPO)

These rules have been in place for over 40 years and have resulted in reduced or eliminated Social Security benefits for individuals who also receive a pension from a job that didn’t pay into the system. With this new law, those who were previously affected by WEP and GPO will now receive their full, unreduced benefits moving forward.

A common question people ask is: Why is this such a big deal? Now, while it’s great that these reductions are being eliminated, what does that actually mean in practice?

To understand the impact, it’s helpful to remember the fundamental principle Social Security was built on: If you pay into Social Security, you’re entitled to benefits based on your work history.

However, starting in 1977, when the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) were introduced, this principle was no longer applied evenly—particularly for those who spent part of their career in jobs that didn’t pay into Social Security.

To give a little historical background, these provisions were enacted to ensure fairness and prevent double-dipping—meaning, they were meant to prevent individuals from receiving full Social Security benefits while also collecting a pension from a job that didn’t pay into the system.

While the intent may have been reasonable at the time, the way these rules were implemented didn’t work out as smoothly as expected. In practice, they unfairly penalized public workers—such as teachers, police officers, and firefighters—by reducing or even eliminating the Social Security benefits they otherwise would have received.

Beyond the financial impact, these provisions also created massive complexity for retirees, leading many to wonder: How much will I actually receive in Social Security benefits if I worked both covered and non-covered jobs Rather than trying to fine-tune these reductions, Congress ultimately decided to repeal them entirely to simplify the system.

Now that we understand the background, let’s go over what these two provisions did so we can fully grasp the significance of their repeal.

The Windfall Elimination Provision (WEP) directly reduced a worker’s own Social Security benefits based on their work history. Social Security calculates benefits based on your highest 35 years of earnings and applies a formula to determine how much you’ll receive.

What WEP did was adjust this formula, lowering the benefit for individuals who also had a pension from a job that didn’t pay into Social Security.

I won’t go into the full details of the formula (since it’s complicated and no longer relevant with the repeal), but if you’re curious about how much WEP would have reduced your benefits, feel free to email us, and we can send you some resources.

However, as a general guideline, WEP reductions were capped at the lesser of:

• $613 per month (as of 2024), or
• 50% of your non-covered pension amount.

For example:

• If your pension was $500 per month, your WEP reduction would have been $250.
• If your pension was $1,200 per month or higher, the reduction was capped at $613.

A Key Exception: The 30-Year Rule

One important detail about WEP was that its impact phased out for workers who had substantial earnings in Social Security-covered jobs:

• If you had 30 or more years of substantial earnings in a Social Security-covered job, WEP didn’t apply at all.
• If you had less than 30 years, WEP still reduced your benefit.

Since WEP is now repealed, anyone who was previously affected will now receive their full Social Security benefit going forward. For those who want to see how much WEP would have reduced their benefits, Social Security has an online calculator where you can input your pension amount to estimate the reduction. Feel free to take a picture of this link for reference.

The Government Pension Offset (GPO) was similar to WEP, but instead of affecting a worker’s own benefit, it reduced spousal or survivor benefits. The GPO reduction was equal to two-thirds of a worker’s non-covered pension.

For example:

• If your pension was $3,000 per month,
• Two-thirds of that is $2,000,
• That $2,000 was subtracted from your Social Security spousal or survivor benefit.

So, if you were entitled to a $3,000 spousal or survivor benefit, but your pension was $3,000, then:

• $3,000 (Social Security benefit)
• – $2,000 (GPO reduction)
• = $1,000 remaining benefit

As you can see, for some retirees, this offset completely wiped out their spousal or survivor benefits, leaving them with zero Social Security income. With the repeal of GPO, anyone previously affected will now receive their full spousal or survivor benefits moving forward.

Now that we’ve covered the impact of WEP and GPO, let’s discuss how this change will affect your benefits and what steps you may need to take to ensure you’re receiving your full entitlement under the new law. As you can tell, the Government Pension Offset (GPO) reduction can be much more significant than the Windfall Elimination Provision (WEP).

WEP had a maximum reduction of around $600. GPO, however, could completely eliminate a spousal or survivor benefit. That’s a major distinction to keep in mind.

To help clarify how WEP and GPO affected benefits, I’ve summarized their impacts on this slide. Feel free to take a picture of this chart for reference. It provides a flowchart to help determine if you were subject to WEP or GPO before the Social Security Fairness Act was passed.

How Will This Impact You? – (18:58)

Now that the Social Security Fairness Act has been officially signed into law, Social Security has the responsibility of implementing these changes. Although they haven’t yet issued specific guidance, based on previous Social Security law updates, implementation could take months—or even over a year to fully roll out.

Some changes will happen automatically, while others may require action on your part. Your Benefit Will Likely Increase. The Social Security Fairness Act officially took effect in January 2024, meaning benefits should increase retroactively from that date. If you were previously subject to WEP, the Social Security Administration (SSA) already has records showing this. They will likely recalculate your benefits automatically, so you won’t need to take any action—just watch for a letter from Social Security informing you of your new benefit amount.

For individuals who lost spousal or survivor benefits due to GPO, Social Security may not automatically notify you that you are now eligible. Take my wife’s grandfather, for example. When he visited Social Security, they told him he wasn’t eligible for his late wife’s survivor benefits because of his government pension. He was never encouraged to apply, because, under the old rules, he wouldn’t have received anything.

But now that GPO has been repealed, he is eligible—and he needs to apply to start receiving benefits. If you—or someone you know—previously didn’t apply for spousal or survivor benefits because of GPO, I highly encourage you to contact Social Security and start the application process as soon as possible.

For retirees over 70, like my wife’s grandfather, there’s no reason to wait any longer. The sooner you apply, the sooner you’ll receive your benefits.

Moving on to potential retroactive payments. Since the law is backdated to January 2024, some people may receive lump sum payments for the months they were underpaid in 2024. It’s unclear whether these back payments will be issued in one lump sum or spread out over time. If you receive a lump sum payment in 2025, it could impact your tax situation—especially if it’s a significant amount.

If you receive retroactive benefits, you’ll want to factor this into your tax planning for the year. This could affect:

• Your tax bracket (pushing you into a higher bracket).
• Medicare premiums (since higher income can trigger IRMAA surcharges).
• Roth conversion strategies (if you planned to do conversions this year).
• Charitable giving strategies (like Qualified Charitable Distributions or Donor-Advised Funds).

I highly recommend working with a tax professional to make sure you optimize your tax situation based on these changes.

For those who are still working or haven’t yet claimed Social Security, the repeal of WEP and GPO means you no longer have to calculate reductions—which simplifies the process significantly.

What Should You Do? – (22:27)

Here are five steps I recommend taking as you wait for Social Security to implement these changes:

1. Check Your Social Security Statement

• Social Security doesn’t factor in WEP or GPO reductions on your statement.
• Logging into your Social Security account or reviewing a mailed statement can give you a more accurate estimate of what your benefit might look like after these changes take effect.

2. Verify Your Contact Information

• Log into my Social Security to make sure:
  • Your address is updated (so you receive important letters).
  • Your direct deposit information is correct (so your payments go to the right account).
• This is especially important if you’re already receiving benefits—you don’t want to miss an important notification.

3. Plan for Tax Implications

• Work with a tax professional to minimize the impact of potential lump sum back payments.
• Consider how increased Social Security income may affect:
  • Your Medicare premiums.
  • Your Roth conversion strategy.
  • Your charitable giving approach.

4. Review Your Retirement Income Plan

• With more Social Security income, you may be able to withdraw less from your investment accounts—which could impact your overall financial strategy.
• This could help preserve your portfolio for longer.

5. If You Were Previously Denied Spousal or Survivor Benefits, Reapply

• If you never applied for benefits because GPO disqualified you, now is the time to contact Social Security and start the application process.
• If you’re over 70, there’s no reason to delay.

For those of you who are clients of Peterson Wealth, I want to reassure you that we will discuss these changes in your upcoming meetings. We’ll review how these changes affect your retirement income, whether or not you need to take any action to claim additional benefits, and tax planning strategies to help optimize your financial situation.

If you have any immediate questions, don’t hesitate to reach out—we’re here to help!

With the Social Security Fairness Act now in place, many retirees will see meaningful increases in their benefits. While some of these changes will happen automatically, others will require proactive steps—especially for those previously denied benefits under GPO.

By staying informed and taking the right actions, you can make sure you maximize your Social Security benefits and incorporate them into your broader retirement plan.

If your financial planner doesn’t know that you worked a job that didn’t pay into Social Security and that you’re receiving a pension from that job, please make sure to let them know. This information is crucial in determining how these changes will impact your overall financial plan.

Will Social Security Be There For Me? – (24:40)

While the Social Security Fairness Act brings good news and relief to many retirees, it does come at a cost to the Social Security system. It’s no secret that Social Security’s long-term funding is a concern. With more baby boomers retiring every day, program costs have begun to exceed the income coming in.

Currently, Social Security has enough reserves to pay 100% of promised benefits through 2035. However, if no changes are made to reform the system, starting in 2035, Social Security will only be able to cover about 83% of scheduled benefits.

Now, with the passage of the Social Security Fairness Act, the Congressional Budget Office (CBO) estimates that the repeal of WEP and GPO will cost the system $200 billion over the next decade. This could move the program’s insolvency date up by six months to 2034.

This presents a double-edged sword—on one hand, we celebrate the increase in benefits for retirees, but on the other, it adds to Social Security’s long-term financial challenges.

I don’t bring this up to be the bearer of bad news, but rather to address some common misconceptions about the future of Social Security. There’s a lot of misinformation out there about the sustainability of the program, so let’s address it head-on.

The truth is that Social Security isn’t going anywhere anytime soon.

There are several ways policymakers can strengthen the system, such as raising the full retirement age, adjusting how cost-of-living increases (COLAs) are calculated, increasing the Social Security wage cap (the amount of earnings subject to Social Security taxes), or raising payroll taxes

Any proposal that reduces benefits or increases taxes is bound to cause political backlash. That’s why no major changes have been made yet, but action will need to be taken before 2034 to ensure the program remains fully funded.

What Social Security Personnel Can and Cannot Do

What Social Security Personnel Can And Can’t Do – (26:51)

It’s important to understand what Social Security personnel can and cannot do when helping you with benefits.

What they can do:

• Estimate your current Social Security benefit.
• Inform you of the amounts you’re entitled to.
• Process your application for benefits.

What they can’t do:

• Provide personalized financial advice.
• Help you decide when to claim benefits based on your broader financial situation.
• Assist with tax planning related to Social Security.
• Run scenario planning to help you maximize your lifetime benefits.

In fact, I’ve seen cases where Social Security personnel encourage retirees to backdate their application, which can significantly reduce lifetime benefits instead of maximizing them. That’s why having a Social Security maximization strategy before applying is so important.

Conclusion – (28:08)

We’ve covered a lot today, so let me leave you with this. Social Security is too important to leave to guesswork. It plays a major role in retirement income planning, and the decision of when to claim benefits can have a six-figure impact on your lifetime retirement income.

I was recently working with a client who originally planned to delay his Social Security benefit until age 70 to maximize it. Given that he wasn’t expecting to receive much due to WEP, he figured it made sense to wait and get the highest possible benefit.

But now that WEP has been repealed, we reran the analysis and found that claiming earlier—either now or at full retirement age—could actually be more beneficial for his situation.

This new law completely changed his strategy by allowing him to receive a higher benefit earlier than expected, reduce withdrawals from his investment portfolio, helping preserve assets, and having a more predictable stream of income for future planning.

So my advice? Take the time to do your homework and run the numbers before claiming benefits.

To wrap up, here are four key takeaways from today’s discussion:

1. Social Security provides incredible benefits. Make sure you have a solid plan to maximize them.
2. The Social Security Fairness Act repeals WEP and GPO. This will increase benefits for many retirees who were previously impacted.
3. Social Security has not yet provided official guidance on implementation. Changes may take months to fully roll out—stay informed.
4. Factor these changes into your broader retirement plan. Consider the impact on taxes, Medicare, and your overall income strategy.

Before we open up for questions, I just want to mention if you’re not yet a client of Peterson Wealth, but you’re curious about how we help retirees create a tax-efficient retirement income plan, I’d love to offer you a free copy of our book. There’s no cost—it’s simply a resource to help you. If you (or someone you know) could benefit from it, feel free to request a copy. And as I always say—if you find value in the book, we might just be the perfect fit to help you navigate retirement.

Before we wrap up, I just want to remind you to feel free to share this webinar with anyone who might find it helpful. As I mentioned earlier, this could be a valuable resource for those affected by these changes.

If you have any additional questions or need further guidance, we’re always happy to schedule a consultation to help answer them. Thank you all for joining today—I really appreciate your time. Before you go, please take a moment to fill out the short survey at the end of this webinar. It helps us understand what topics are most important to you so we can tailor future presentations to your needs.

Question And Answer Session – (30:45)

Alright, with that said, let’s go ahead and open it up for questions. Zach, do we have any questions coming in?

Zach Swenson: Hey Carson, nothing coming through just yet. Maybe let’s give everyone 30 seconds to submit any last-minute questions.

While we’re waiting, I just want to highlight one important point. If you are a widow or widower and your late spouse had a pension that was not covered by Social Security (meaning they were subject to the Government Pension Offset, or GPO), you might be wondering how this affects you.

The key thing to understand is if you are now receiving a survivor pension from your late spouse’s work, it will NOT be subject to the GPO. The GPO applies only to your own pension, the one you personally earned. So if you inherit your spouse’s pension, rest assured that this repeal won’t reduce your survivor benefits.

Here’s a question, does this mean that people who have never paid into Social Security will now receive benefits?

No. If you’ve never paid into Social Security, there’s no work history to base a benefit on.

Carson Johnson: This law only affects those who already qualify for Social Security benefits but were previously subject to reductions under WEP or GPO.

My husband’s Social Security benefit is 3–4 times the amount I receive. I also have a substantial government pension. Can I now claim half of his Social Security since it’s larger than mine?

It depends. If your own Social Security benefit is less than half of your husband’s, then yes, you may be eligible for a spousal benefit, which would be half of his benefit at your full retirement age.

That said, now that GPO has been repealed, your eligibility may have changed. I’d recommend reviewing your updated benefit statement or consulting with us to go over your specific situation.

If I don’t have enough quarters to qualify for Social Security, can I get reimbursed for the Social Security taxes I’ve already paid?

Unfortunately, no. Social Security requires at least 40 quarters (10 years) of covered work to qualify for a personal retirement benefit. If you haven’t reached that threshold, you won’t receive a Social Security retirement benefit, and there’s no reimbursement option.

However, if you are married to or were previously married to someone eligible for Social Security, you may qualify for a spousal or survivor benefit instead.

Can you repeat the link for the resource you mentioned earlier?

If you’re looking for the WEP/GPO reduction calculator, please email us, and we’d be happy to send it to you. This calculator can estimate how much your benefits may be affected under the old rules and help you compare with the new changes.

Do you post the slides so we can review them later?

We don’t post the slides separately, but the entire webinar is recorded and will be available on our website. You can watch the replay at any time if you’d like to review the information again.

Zach, any other questions coming in?

Zach Swenson: Nope, nothing else at this time.

Carson Johnson: Okay, great! Thank you all again for joining! If you have any additional questions, feel free to reach out to us directly. If you’d like a copy of our book or a consultation, don’t hesitate to request one. We appreciate your time today and look forward to continuing the conversation. Thanks, everyone!