Your Social Security income may change because of a new rule

Social Security payments vary based on two key factors: age when claiming benefits and average salary earned during working years. 

While Americans who have worked full-time and paid into the Social Security system for at least ten years are eligible for payments, there are some caveats.

Congress passed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) in the late 1970s and early 1980s to conserve funding for the Social Security trust and extend benefits to as many Americans as possible.

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The legislation aimed to reduce Social Security payments for public employees such as firefighters, teachers, police officers, and federal government employees with access to robust pension plans.

Joe Biden signed the Social Security Fairness Act into legislation with bipartisan support on Jan. 5, 2025, to give public employees access to their full benefits.

Now, millions of retirees are entitled to backpay, but the timeline for when they will receive it — and how this will impact Social Security funding — remains unclear.

A retired couple is seen walking along the beach. The rising costs of food, housing, and healthcare have made it difficult for retirees to live off of Social Security, but some seniors may see their payments increase soon. 

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Some retirees will receive a boost to their Social Security payments

Before the widespread popularity of 401(k)s, employer-sponsored pensions were the most common source of retirement income.

Ronald Reagan passed the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) to reduce the Social Security payments received by seniors with ‘non-covered’ pensions that weren’t subject to Social Security taxes.

Biden recently enacted the Social Security Fairness Act, which repealed both pieces of legislation, and increases benefits for 3.2 million seniors.

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Not every former federal employee will receive a boost in their benefits, but the eligible 28% could see their payments increase up to $1,000 per month.

These retirees will also receive retroactive payments to make up for the years of reduced benefits, but it could take at least another year for this backpay to be distributed.

This increase will undoubtedly help millions of seniors make ends meet, as the price of food, housing, and medical care is still rising.

 However, retirees still find that Social Security falls short of their needs, with 96.5% of those receiving benefits noting the 2025 Cost of Living Adjustment (COLA) is insufficient to offset inflation.

The Social Security funding shortfall could worsen

The Congressional Budget Office (CBO) estimates that the Social Security trust will become insolvent by 2034, but the Trump administration’s proposed tax policies could expedite the shortfall by three years.

The CBO notes that when Social Security becomes insolvent, benefits will need to be reduced by 23% to keep the program afloat.

Related: Social Security payments will be affected soon by a COLA change

Retirees now risk facing reduced benefits within the next six years, and the Social Security Fairness Act may further reduce available funding.

40% of seniors rely on Social Security for their retirement income, and 73% of workers are concerned they will never receive benefits despite paying into the system for decades.

Economists have suggested raising the age at which retirees can begin collecting benefits—currently 62—to extend the longevity of Social Security. Others have proposed reducing the income cap on taxed income, as most funding for benefits comes from taxes.

Only the first $176,100 of a worker’s income is subject to the 12.4% Social Security tax, but removing or even raising that tax cap could provide the funding support to avoid insolvency.

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