Editor’s note: This is part two of a three-part series about making the most of the changes in Social Security benefits for federal employees brought about by the new Social Security Fairness Act (SSFA). Part one is Five Wins for Federal Employees in the Social Security Fairness Act. Part two is Social Security Fairness Act Adds to Pressure on Safety Net.
Understanding how to strategically leverage the opportunities created by the repeal of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) by the new Social Security Fairness Act (SSFA) is essential. The changes open the door for retirees to take full advantage of Social Security benefits while refining their income strategies for optimal long-term financial health.
The first step in this new landscape is assessing how the additional Social Security income can fit into your overall retirement plan. If you’re receiving a government pension, the removal of the WEP and GPO means your Social Security benefits will no longer be reduced. This added income can help lessen the reliance on your pension distributions, freeing up those funds to be used in more strategic ways. For example, by reducing pension withdrawals, you can allow those assets to continue growing, creating a larger reserve for future needs or for leaving a financial legacy.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For retirees with a spouse, the repeal of the GPO presents an exciting opportunity to enhance spousal and survivor benefits. Spouses can now receive their full Social Security benefits without offsets, which strengthens income security for families. This is particularly significant for surviving spouses who may have previously been left with reduced benefits. By integrating this additional income into your financial strategy, you can create a more stable and predictable financial foundation for your loved ones.
Planning with other retirement income streams
One of the most impactful ways to maximize this opportunity is by carefully coordinating your Social Security benefits with other income streams, such as pension payments, investment distributions and annuities. With the added income from Social Security, you can evaluate whether a lump-sum payout from your pension might make more sense than a traditional annuity option. The flexibility of having both sources of income allows you to explore strategies that prioritize growth and control over your assets.
For those nearing retirement, this is also an ideal time to reconsider the timing of your Social Security benefits. The removal of the WEP and GPO means your benefits will be higher than previously projected, which may influence the decision of when to start claiming them. Delaying benefits, if possible, can further enhance your monthly income, creating an even greater long-term advantage. Combining this strategy with a well-planned approach to your pension and investment distributions can ensure you’re getting the most out of every dollar.
Will there be a tax impact?
Another critical consideration is the tax impact of this additional income. While the repeal increases your Social Security payments, it’s important to recognize how this might affect your taxable income. For retirees who’ve been managing their income to stay within lower tax brackets, the new benefits might push them into higher thresholds. By proactively working with a financial professional, you can develop strategies to offset these impacts. This might involve shifting withdrawals from tax-deferred accounts to tax-free vehicles, such as Roth IRAs, or employing tools like our Build Banking™ system to create a more tax-efficient income stream.
The added income from Social Security also creates an opportunity to build a more comprehensive legacy plan. With the extra funds, you might consider redirecting some resources toward life insurance or other financial products that can provide for your heirs. Additionally, the increased cash flow can support charitable giving or other initiatives that align with your values and long-term goals.
For retirees who retired in the past 12 months, the retroactive lump-sum payments from the Social Security Administration (SSA) offer a unique chance to boost your financial position. Whether you choose to use these funds to pay down debt, invest in growth opportunities or enhance your emergency fund, this one-time payment can be a powerful tool to strengthen your financial plan. It’s essential to approach these funds strategically, ensuring they align with your overall objectives.
What the changes mean for couples
For couples, the repeal of the GPO makes it easier to explore ways to maximize spousal benefits. One effective strategy is for the higher-earning spouse to delay claiming Social Security, allowing those benefits to grow while the lower-earning spouse claims earlier. With the GPO no longer in play, the surviving spouse can now count on the full benefit amount, creating a more robust safety net for the later stages of retirement.
Finally, these changes make this an opportune moment to revisit your estate plan. With the enhanced income from Social Security, you might consider adjusting how your assets are allocated to ensure they’re working as effectively as possible for your family. Whether that involves updating beneficiary designations, creating trusts or reevaluating how your assets are titled, this is the time to ensure your plan reflects your new financial reality.
The repeal of the WEP and GPO is a game-changer for retirees and future retirees alike. By taking a strategic approach to these changes, you can optimize your benefits, protect your loved ones and create a financial plan that offers stability and growth for years to come. The key is to take a proactive approach, working with a trusted financial professional to align these new opportunities with your personal goals.
For information on pension maximization and navigating future decisions, visit brianskrobonja.com to learn more.
Securities offered only by duly registered individuals through Madison Avenue Securities, LLC. (MAS), Member FINRA &SIPC. Advisory services offered only by duly registered individuals through Skrobonja Wealth Management (SWM), a registered investment advisor. Tax services offered only through Skrobonja Tax Consulting. MAS does not offer Build Banking or tax advice. Skrobonja Financial Group, LLC, Skrobonja Wealth Management, LLC, Skrobonja Insurance Services, LLC, Skrobonja Tax Consulting, and Build Banking are not affiliated with MAS.
Skrobonja Wealth Management, LLC is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Skrobonja Wealth Management, LLC and its representatives are properly licensed or exempt from licensure.
The firm is a registered investment adviser with the state of Missouri, and may only transact business with residents of those states, or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.
Related Content
- Social Security Fairness Act Will Boost Retirement Benefits For Millions. Will You Be Impacted?
- Social Security Login Changes Taking Effect Soon
- Five Changes Coming for Social Security in 2025
- Are You Prepared for the Evolution of Retirement?
- How to Measure the Health of Your Retirement Plan
-
Virginia Tax Rebates 2025 Coming Soon? What to Know NowTax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
What to Know Before Flying With Your PetFrom documentation and TSA screening to carrier rules and airport relief areas, here’s what to know before taking your pet on a flight.
-
We Are Peter Lynch: How to Invest in What You KnowTake a look around, go to a free stock market data website, and get to work.
-
Want To Retire at 60? See if You Can Answer These Five QuestionsForget waiting for Social Security and Medicare to kick in. You may be able to retire sooner than you think.
-
Trump Tariffs and Taxes: Waiting to See What Happens Is Not a StrategyLike presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle. If you're paralyzed by uncertainty, you could be missing opportunities to benefit your financial future.
-
Is a Family Office Right for You? The Multimillion-Dollar QuestionAs ultra-high-net-worth individuals increase in number, many are turning to family offices to manage their complex finances. Here's how family offices work, courtesy of a finance professional.
-
This Is How a Lot of Law School Students Are CheatingGrowing numbers of students are falsely claiming a learning disability to score more time to take tests. This has real-world consequences in which fellow students, law firms and their clients pay the price.
-
Stock Market Today: Stocks Rise on Less Deadly ConcernsMarkets are forward-looking mechanisms, and it's good when price action shows there's a future to look forward to.
-
Who Will Replace Jerome Powell as Fed Chair?Even if President Trump doesn't make good on threats to fire Chair Powell, the Fed leader's term ends in 2026.
-
The Hidden Cost That's Ruining Vacation Home DreamsAre rising HOA fees derailing your second home dreams? Annual dues, insurance premiums and taxes are rising, boosting total ownership costs. Here's what you can do.
