Millions of Public Workers are Set to Get Higher Social Security Benefits

Peter, very good to see you.

Welcome back, everyone. We have some big news. Millions of public workers are set to see an increase in their Social Security benefits. So a new bill called the Social Security Fairness Act was just signed into law and will increase payments for nearly three million former and current public employees. So Peter, what exactly is changing and how much can these workers expect to see in their benefits? Well, how much is going to all be relative to the years that maybe they were a state or a public employee where that income did not receive credit towards Social Security, because at the time, years ago, before this law went into effect, they were instead offered a state pension that they basically offset. They said, well, if you're getting the state pension, then those earnings don't count towards Social Security. But this was only in some states. So I think that's where the fairness part of this act comes in, is that how can you offset Social Security for workers of the state in some states, but not do it in others. And so the outgoing Biden administration actually, you know, flurry of activity as that that administration was exiting. One of the things that they did was to try to fair up the Social Security, offset this this windfall elimination provision, as it's called, basically saying that, hey, if you were a public worker, a teacher, a state employee in one of these states that formerly those earnings had not counted toward your Social Security.

Well, now it's going to. They're going to retroactively put that back in. So the amount of adjustment is going to be proportional to what your wages were during those years and how many years ultimately you work there.

I see. OK, so what if someone has already filed for Social Security benefits? What steps should they take? Theoretically, they should not have to do anything. They should automatically be retroactively included and then you see a bump in your Social Security. But it never hurts to double check. Right.

The government's high efficiency level. And I just think that you should probably double check your records. Now, I don't know when and I don't expect it to be immediate, but I do encourage people to go and double check your benefits record. In fact, everybody should do this on a regular basis.

I do this on a regular basis. And I'm years away from Social Security because I want to make sure that the government and the IRS and the Social Security Administration have accurately reflected the earnings history. And so you don't want zeros or wrong numbers in your Social Security calculations. I think everybody should double check, but especially if you were impacted formally by the windfall elimination provision. And now the Social Security fairness is rectifying that.

And Peter, how do people check? What's the website? Thank you. Yes, SSA dot gov, as in Social Security Administration. And it is a dot gov website, SSA dot gov. And then you can start an account or log into your account backslash my account.

SSA dot gov is the website. Thank you. And what if they have not filed yet? Again, I still encourage people to double check. Now, this gives a little bit more time for this to be corrected before ultimately you would start collecting. However, even if you're years away, I encourage people to think about retirement on the very first day of their job, including making sure that they're getting the Social Security credits. Now, it doesn't often happen that early, but even into your 40s and 50s, well before Social Security, you should be double checking your Social Security record. So set up that Social Security Administration, SSA dot gov account for yourself where you can double check that. Should this change affect their overall claiming strategy for these public workers who will be affected? It probably won't change the claiming strategy significantly. There could be some some caveats, some one offs where it might because if you're coordinating benefits between a spouse, perhaps now those numbers are a little bit different.

So you would have to reconfigure that. But by and large, I think that most people's strategies will not be largely affected as far as like the timing of when to go out and claim and collect and how to claim and collect your benefits probably won't be largely affected by this. But again, this is why we double check these numbers early. The difference between a well thought through an optimized decision on Social Security and kind of just say, well, it's available, let's go ahead and go get it. If that's mistimed, that can be several hundreds of thousands of dollars over the course of somebody's lifetime, over the course of a married couple's lifetime even more. So that's money that's either going to come from Social Security, come from your personal assets or just not be there at all. And of those three options, I'd rather that money come from Social Security, make the most out of it. So I think it always pays off to double check and to really strategize on when and how to claim and collect Social Security. And it's not always get it the day you can at 62.

It's not always wait all the way until 70. Sometimes the solution is somewhere in the middle. In fact, I would say most of the time it lies somewhere between the two extremes. So I as a younger person, when I first heard this news, this made me question, you know, with more people seeing an increase in benefits, isn't this going to affect the program solvency? Yeah, for everything good, there's a little bit bad, right?

Every pro there's a con. Yeah, absolutely. I mean, we've already talked about the fact that the Social Security Administration trust fund air quotes there is running dry and they expect to be on a pay as we go system before this even was a factor as early as 2033, rather than being able to pay the full promised benefits to everyone. And so now by affecting millions of workers and paying them more and giving them credit here.

Yeah, I mean, we're paying out more. And that date when the trust fund runs dry probably is going to accelerate as well. And so it accelerates the time that Congress and our leadership need to get serious about doing something and coming up with some kind of solution, which they just seem completely opposed to actually addressing serious. And we need to figure out alternate streams of income and retirement. We've got a plan for ourselves. I mean, I as much as Social Security is that safety net, it does not provide for a true lifestyle.

It was always intended to keep people just above the poverty line. Right. And most people need to supplement that significantly with personal savings and assets and retirement accounts. All right.

So, again, you know, we've talked through all the silver linings. Could this change have any other negative implications? Yeah, I mean, I think there are a couple and these are kind of ancillary here, but Social Security itself typically is tax free, but it goes into an equation that it can become taxable. So for a married couple, if they're adjusted, modified, adjusted gross income goes over certain thresholds.

Thirty two thousand. It can be 50 percent taxable and then forty four thousand. It can be 85 percent taxable. Maybe this slight increase in Social Security throws off that equation in a way that you bump over one of those thresholds. And when you weren't paying tax on Social Security before, suddenly you are. And even though you're getting more Social Security now, you're actually receiving less of it. So that is kind of an unintended consequence there that I haven't seen this tangibly.

I haven't seen it firsthand yet, but it is a possibility. And then sort of on the other end of the extremes of income, if you've already got a pretty high income, maybe you're, you know, a government worker that has multiple pensions within your household and your income is up above the two hundred thousand mark and you're to the point where Irma comes into effect. Irma is your your Medicare premiums.

If you suddenly get some additional Social Security, you know, that could that could bump you up above that threshold and possibly cause your Medicare premiums to be increased, impacted by Irma. So, you know, I think that overall this is wildly a good thing, beneficial for those that it impacts for the rest of the system as a whole, potentially some negative consequences. And then a very, very small caveat percentage, very small minority that could personally benefit from an increase in Social Security may see these other negative impacts and consequences, unintended consequences affect them. I think that would be very few and far between.

But for those individuals where it does, there's always a pro and con to everything. Right. And a lot of moving parts. I think, you know, if we take one thing out of this, though, claiming strategies for Social Security is so very important.

So many permutations, though. And Peter, I know that's something you specialize in. So somebody wants to talk through this news or again, when they should claim, what's the best way to reach you? Yeah. And I've already seen it. I was actually super excited when I saw this in real life, just a couple of days after the law was announced and passed, where somebody said, well, well, I you know, I've got this small pension from the state of California, but I got all those years where I had zeros on my Social Security record. And I a big smile came over my face, paying attention to the news, having heard about this two days prior. And that client was like, what, what? And I was like, actually, that's getting ready to be fixed.

So she was also excited after that. If you want to get in touch with me again, just run through the numbers on Social Security. It makes such a big difference. And it impacts how long the rest of your money is going to last. So even if you're well funded, you want to make the most of every opportunity and leverage the benefit that you have worked and earned for.

So you are entitled to give me a call. We'll run through those numbers as part of the Optimized Retirement Plan nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. You can also go online to rich on planning dot com. That's what it looks like.

Rashan planning dot com. All right. Perfect. Peter, thanks for your time today. It was a pleasure. Thank you.

Hey, folks, Rashan here with Rashan planning. So glad that you are enjoying the podcast Planning Matters Radio. You know, one of the tools that we've put out there that people really seem to appreciate and really are our finding of value is at nine one nine retired dot com. It is your retirement tax bill calculator. If you've got any kind of retirement account, your tax deferred 401K or IRA, this is the Web site.

This is the resource where you can go. You can plug in your own numbers, your information. You can slide the the tool calculator up and down for your tax rate or your amount of savings and see what your tax bill is likely to be if you default and defer to the IRS as plan versus what you could potentially bring that tax bill down to. A lot of times it is a very significant savings.

So if you have not yet, go to the Web site nine one nine retired dot com. Run your numbers on the retirement tax bill calculator. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to take investment tax or legal advice from an independent professional adviser. Any investment and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management, a registered investment adviser, fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation. Peter Rochon and Rochon Planning are not affiliated with nor endorsed by the Social Security Administration or any other government agency.