Social Security Fairness Act Dec 2024

This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com. With certified financial planner, Hans Scheil, best-selling author and financial planner helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now, let's get started with Finishing Well. Welcome to Finishing Well, certified financial planner, Hans Scheil, and today's show, Social Security Fairness Act 2024.

Actually, December 2024, so right at the end of last year, they passed the Social Security Act, which interestingly, it makes me think of when it comes to fairness, that if you're familiar with this verse, a pretty famous verse, I love this verse, Joel 25 says, and this is God speaking, I will restore to you the years that the swarming locusts have eaten. And the amazing thing about that is it's such a promise. And I don't know if you've had him do that in your life. He certainly has done that in my life. He's done it financially. He's done it emotionally. He's done it relationally. And time again, that, you know, I thought that, oh, man, you know, I'll never get all this back. And he, he somehow or another, makes things right.

I guess that's why he's the king of righteousness. And so it's really cool for these people that you're going to hear about shortly that they all of a sudden have got this legislation to make some things right. And so I think it may not involve you personally, but I bet you know somebody that it will involve in the ramifications of it really touch everybody. So we're excited to find out more about it, Hans. And everything that's out there, even if it's con or it's against whatever I'm thinking about it. And when the topic of Social Security hits the news, governments passing laws about it, I read them thoroughly and think about the ramifications. So if you missed this, well then I'm going to give you a little update today so you'll understand what it was. And if you've read about it, you can compare the conclusions you drew to what I'm going to tell you now. So the Social Security Fairness Act, it was signed right between Christmas and New Year's.

And I know because I was waiting to write this show until they actually passed it. Because it was sitting on Biden's desk for a good while. But in any case, what it amounts to is people who worked in generally the public sector, like I can think of the employees, the teachers in Texas, the state employees in Texas, they didn't pay into Social Security. Instead, they paid into something, or the state of Texas did, a pension plan. So it was a Social Security replacement. So they don't get Social Security checks. Or they get a reduced Social Security check if they had other work. And it even affects spouses, state employees in California. There's many federal government workers. I'm just picking out those two states. There's a lot of people that were affected by these two pretty ancient laws in regards to Social Security.

And I'll just tell you what they are. One was called the Windfall Elimination Provision. And the second one was the Government Pension Offset. And what it really amounts to, they put nice words on things, but it just took Social Security money away from a certain group of people. Because they didn't pay in for it, or they didn't pay in enough for it, and they're getting another pension. And that group of people has been pretty loud and screaming and complaining about this for the whole time I've been studying Social Security. I mean, these are ancient laws. And so there's no point in getting into the details of them on today's show too much because they were just eliminated or repealed.

But I'm going to tell you a little bit about them. I'm going to go through a couple of examples and tell you about the politics of all this. And the way it's going to affect everybody that's on Social Security, which is most of our listeners or certainly coming for them in time here, is who's paying for this is the trust fund of Social Security. I mean, they didn't increase taxes or increase Social Security taxes or ask for back taxes. The Congress didn't. And the President didn't when they signed this bill. They're just going to pay for this, where they're going to pay these people the Social Security checks that they feel like they deserve.

And the new law says that they do deserve them. And the money just comes out of the trust fund. And the ramifications of that is it just drains the trust fund even quicker.

So go ahead. I was just going to say, wasn't this actually the first or maybe the second year ever that they actually had to dip into that trust fund? Yeah, well, last year was, which last year's report was on 2023. And in 2023, they actually dipped into the trust fund. Okay? And you'd think that it was all gone or something by you read the news reports, but they dipped into it a bit in 2023, reported in 2024.

And I'm still waiting for the 2025 report, excuse me, the 2024 report, which will come out in 2025, usually about April or May, and we'll do a show on that. But that's correct. I mean, they are paid for this out of money that we already have or money that's already set aside. And getting into all the details of that, I mean, this thing was repealed. And so why don't I just give you a couple of examples which shows the effect of this thing. Okay?

Exactly. So the first example, which we're calling Bill, is Bill's wife's pension was $3,786 a month. That's how much she gets from the state of Texas because she was a teacher there forever.

Okay? And so Bill's Social Security is $3,331 a month. So between his Social Security and her pension, they're getting over $7,000 a month.

Okay? And then whatever savings and that that they have. Now, because she had no Social Security credits, she could be the spouse of Bill and she could get $1,665 a month by being married to Bill for all those years and just taking the 50% benefit of his. But before the government pension offset, she got zero because of the $3,786 that she collected and she never paid into Social Security. So they would say that she's been robbed of her spousal pension on his Social Security. And so now they've waived or eliminated the GPO, the government pension offset, so now she's going to get the $1,665 a month. And to add to that, they're going to pay her for all of 2024. And nobody knows how long those checks are going to take to come because the Social Security administration wasn't ready for this just to get signed into law. So at some point here, Bill's wife is going to get a check for all of 2024 and then she's going to start getting a check for $1,665 a month. So again, that's the Social Security and Fairness Act.

So that's example number one. Well, one other angle to that, right, is when her spouse passes away, right, she would really get hammered, right, if under the old plan. But now she'll get his full Social Security plus her pension, right? That's exactly right. I didn't even think of that. But yeah, because that would have been whacked down, too, because of the $3,786 she was getting a month for her pension.

But now that's all gone. And it's being paid for out of the trust fund. Now let's look at the next example, which is Maria. Maria was 25 years a teacher, no Social Security payments. She has a $2,000 a month pension. She worked for 10 years in the private sector of which she paid Social Security in. And her Social Security check would have been $1,500 a month just based upon those 10 years of paying in where she worked in the private sector. But with the windfall elimination period provision, she was only getting $5.44 a month instead of the $1,500 that she would have gotten without the windfall elimination period. So in other words, she's going to get an extra $1,000 a month for the rest of her life, for the full $1,500, and she's going to get a bonus check for all of 2024. Paying this retroactively for a year. And it just seems like Maria might be a little more deserving than Bill and wife.

You know, that's not for us to decide. But in any case, you know, I wanted to give a couple examples. And this whole business of paying backwards for a year, you know, had some political ramifications to it. Although they didn't pass this bill until after the election. And it had bipartisan support. So it wasn't like just one side was supporting this.

This thing really had bipartisan support. And I think a lot of that has to do with they're really using the word fairness, and they had been successful in convincing the Congress that these people were getting a raw deal. And so they wanted to pass the Social Security Fairness Act.

And so there you go. Well, in her case, as I was thinking about it, since she had paid in for those years, it does seem unfair. In other words, she was working in the public sector, too. But had she never worked again, she would have gotten that money.

So how could it be fair? You know, this one, like you say, it seems to have more merit. But nonetheless, there are ramifications to all of us.

Obviously, if we're already having to dip into the trust fund in order to get these paid, then we've made the problem worse. So looking at the whole thing to try to fix it, I get that. But coming up, we're going to really get into a lot more of why the study of this baseline, right? Or you want to explain a little bit about what we're talking about? Yeah. I mean, so in the second half of the show, we're going to go deeper with Social Security and talk about the decisions that people make and maybe bring up back some of these examples.

Yeah. So this is a good time to remind you that the show is brought to you by CardinalGuide, cardinalguide.com, where there you're going to find the seven worries tabs. And today's, obviously, is Social Security. And so if you click on that tab, there you have, interestingly, all kinds of wonderful examples of what we're talking about today in another whole video series on the same idea of the Social Security Fairness Act, December 2024. And then you've got, wonderfully, the Contact Hans or Tom page there at cardinalguide.com and Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And so we've got a whole lot more coming up. The Social Security stuff to me is just like, wow, talk about a windfall in its own if you know what you're getting into.

So we're going to spend some time with Hans when we come back. Stay tuned. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil and today's show, Social Security Fairness Act, December 2024. And so it does have a lot of ramifications, Hans. Well, it does. And I think it's kind of cute the way they name bills that they pass in Congress or laws. So a lot of times the bill actually does the opposite of what it says it does. So this is Social Security Fairness Act.

And, you know, you could go through here and it does just the opposite of fairness. It's kind of like the SECURE Act, which they passed twice about retirement money. It says setting every community up for retirement. And it really is a way to tax people that inherit IRA money more and quicker. So a lot of times when they name these bills, I tend to be the cynic that talks about Social Security Fairness Act.

I just read them. I don't try to be political. I just try to understand them and then think about the ramifications of retirees that are walking through my door hiring me to do financial planning. And Social Security is a big part of that. So let's talk about Social Security. So that is the first worry in our list. It's up in the upper left-hand corner of the board. It comes up every seven weeks.

And that's going to be the first thing we're going to do in financial planning is we're going to get a handle on your Social Security. How much is it? How much if you take it now? How much if you take it when you're at full retirement?

How much if you take it at 70? And then we bring in the spouse into the equation. Are you married? Or were you married to the same person for 10 years or longer? Are they deceased?

Are they divorced? We want to get the whole lay of the land. And then we want to look at the spouse's Social Security check. And the first thing we're doing with this is we're deciding what date are we going to start the Social Security. And for some people, out of necessity, that's going to be the day I stop getting paychecks. So if I'm going to retire or I was forced to retire at 64 and I don't have enough other money to live on for a while and I'm not going to go back to work, well, then it sounds like we're going to be turning the Social Security on now.

We're going to take that as a given. And then we're going to do the rest of the financial planning around that. Most people that come to us have some retirement savings. And many of them have significant retirement savings. And so we're going to look at them and we're going to say we always ask people right off the bat when we're first meeting them, what's your plan to take Social Security?

Because we want them to flush out. We want them to tell us what they plan to do in the event they'd have never met us. And for a lot of people, it's going to be starting Social Security the day they retire, okay, wherever they are along the system. And then we always ask them, well, are you open to looking at other choices? You know, if we're able to discover a way that you could do better by waiting some period of time, maybe not all the way to 70, maybe till 70, are you open to listening? Do you want us to do that?

And most people answer that yes, even though they might be grounded in their initial decision. And so we're trying to establish like how much are we going to get from Social Security? I mean, when are we going to start getting it? Because we know that once that started, that is going to come in for the rest of your life. And it's also going to be inflation adjusted every year. And for most people, that's significant.

So that's the first thing we're going to do. Yeah, and I love that you emphasize that idea is here's the decision. You don't have many decisions in life, of your financial life anyway, like, what you choose here will have a huge impact on the rest of your life, right?

Because up until that time, you've made no decisions as far as Social Security is concerned. But now all of a sudden, here comes a decision and yeah, there's a couple of extreme ways you can take it back. But for the most part, 99% of the people once they do that, here you are. And it really is a fascinating study.

I've enjoyed it every show that we've ever done on the subject of maximizing other ideas in order to make sure that this one really pays off for you as much as possible because here comes a check every single month for the rest of your life. It is. And I mean, it took me about 15 minutes to convince you to delay your Social Security. Well, maybe it took longer than 15 minutes. Maybe I had to go over it two or three times over a few weeks. But you knew almost nothing about Social Security when I met you, Robbie. That's true.

Less than nothing perhaps. Yeah, and you were just kind of discounting it. You just didn't think it was that big of a deal. It didn't play that big of a role in your life and you knew you were going to work as long as you possibly can. And so we brought it to the table and then you very quickly could see, well, I'm not going to take this at 65 and I'm not going to take it at 66. I'm going to wait until 70 primarily around the reason that your wife is much younger than you and she is going to collect off of your benefit because your benefit is significant.

And the longer that you can wait to take it, the more she's going to get after you die, assuming that you die first, which it doesn't always work out that way. But you all of a sudden could see that this is a hidden life insurance policy. And so you were able to just delay this thing all the way until 70. And then we changed courses a little bit a few years ago as you all of a sudden had a need for the money and a desire for the money to pay for some very important things. And so we made it almost to 70, but we took it a little short of that and you were very glad to get that money and it was really good to see that we weren't so ingrained in waiting until 70. Yeah, that was the beauty of the flexibility of the plan is, you know, clearly in my own case, I had completely bought the urban legend that there's not going to be any money in Social Security anyway.

So it's nothing really to plan on because who knows if that'll even be there. I mean, I had no sense of that was going to be a good thing, Social Security. This is really sad that I had such ignorance about the whole thing. But like you said, it turned out to be just like, oh my goodness. And yeah, you make the point that not only does it affect you for the rest of your life, but in your case, we're like me, where my wife's seven years younger than me and being concerned that, you know, she's well taken care of long after I'm gone, you know, it really is. It's exactly what you said. It's another way of life insurance.

Well, it is. And so, you know, you got to there. And what I always tell people is, you know, in your case, you're still working and you plan to keep working. And so it was easy for you to make the decision, I'm going to wait till 70. Other people, maybe they're retiring at 65 and they have studied this and they said, you know, I'm going to take this because it's going to be the only check I have coming in. I have this out of a lot of clients that they have substantial retirement savings, which they don't want to touch because they got to pay taxes and all that kind of stuff. But they know they got to take some of it to live and they're retiring at 65 because of that substantial retirement savings. And then they say, I'm going to take my Social Security early, even before 67, just because I want to have a check coming in.

I've always had a check coming in. And then my wife's going to take the spousal benefit, or maybe we're talking to the wife and this is the husband, they're going to take the spousal benefit again so that she has some check coming in. And we're going to diminish our Social Security benefits because we want to get a check from somebody. And what we're able to do in income planning, which now we're over on the right side of the board in the fifth worry, income planning, is we're able to take money out of their retirement account and it's called a Social Security bridge. And so we're going to plop a lump of money or we're going to transfer it out of your retirement account, tax deferred or tax free in a rollover, into this annuity that only pays out for a few years. And you can match your Social Security check that you would have gotten or match a larger amount and it's like sending yourself a paycheck. And it allows you to then delay the Social Security to 70 and get the much higher amount that's going to be paid out for life and inflation adjusted.

And even if you tell me I'm not going to live long enough to enjoy it, well maybe your spouse is going to live long enough to enjoy it. And that's going to be the only check that they have. Yeah, it's a fundamental part of, you know, from my standpoint, I know that you taught that of laying out this plan like, okay, well we're going to have this much coming in and then what do we got here and what's this other money for over there and those things. And so as we talked about at the beginning of the show, this Fairness Act affects us all as they go to fix Social Security. The way they fix it may be to change the full retirement age or all sorts of other things like that, right? Well, they're going to have to fix it. And it's of my opinion that they will fix it.

And it's not as dire as people make it out to be. That's why I'm hesitant to tell people like this Fairness Act and these checks they're going to pay to these people is going to bankrupt Social Security. It's not going to bankrupt Social Security. It's just going to further deplete the trust fund. And the trust fund depleting is not a good thing. And if you believe their projections, if we do nothing, it's going to run out of money in like 2035, okay?

And which is 10 years away. So they got to do something about it and they will do something about it. And the levers that they can pull, they can either increase the Social Security tax that workers pay. So we got more money going in.

That's not going to be real popular. They can delay the retirement age so they can take the people. They won't do this to people in their 60s. But they can take the people back in their 40s and 30s and maybe even in the early 50s. And they can say, oh, you can't retire at 67 on full benefits.

You got to wait until you're 69 or somewhere. That's another thing they can do. Yeah, and I'm afraid we've run out of time again before we ran out of show. We were going to remind you that this show is brought to you by cardinalguide.com. And at cardinalguide.com, there is the seven worries tab.

Today's worry tab is Social Security where you got all sorts of show notes and examples and boards to look at on details on what the Social Security Fairness Act is. As well as the Contact Hans and Tom page. And, of course, Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. It's all there at cardinalguide.com. Great show, Hans. Thanks.

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Finishing Whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a Registered Investment Advisor. BCM and Cardinal Advisors are independent of each other.

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