Good News as The Social Security Fairness Act passes in Congress eliminating the WEP and GPO
For the past 40 years, many retirees faced a reduction in their Social Security benefits if they also received a pension from a source other than Social Security-covered employment, such as a foreign government or certain U.S. government jobs. This reduction was due to two provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These provisions were intended to prevent "double-dipping," where individuals seemed to be collecting full benefits from two different pension systems. However, many felt this was unfair, as these retirees often paid into both systems over their careers and relied on both income streams in retirement.
The good news is that this is changing! On December 21, 2024, the U.S. Congress passed the Social Security Fairness Act, which will eliminate both the WEP and GPO. 1
What this means for expats:
Americans who have moved overseas who have paid into the US Social Security system and who have also contributed to a foreign state pension would see their Social Security benefits reduced by up to 50% due to the WEP. Now, retirees can collect on their Social Security benefit at 100% while also receiving the foreign pension. This is a significant increase in retirement cash flow for retirees and it should be celebrated.
What this means for government workers:
Many U.S. federal workers were subject to the GPO which reduced the amount of their government pension benefit (ie., FERS) once the retiree (or spouse) becomes eligible for Social Security, usually at age 62. Often workers were paying into both systems at one time or another and were surprised to learn that they were not eligible for both benefits at 100%. Now, with the GPO being eliminated, their government pension won’t be discounted.
Opportunities for retirement planning:
If you're in your 60s and collecting a pension from another country or the government, you might benefit from delaying your Social Security claim. This can allow you to receive the highest possible Social Security benefit, which is often much higher than if you start collecting earlier.
Here's a reminder: To qualify for Social Security benefits in the U.S., you need to have worked and paid taxes for at least 10 years (40 quarters).
Want to find out your estimated Social Security benefit? Head over to SSA.gov and get your free Social Security statement.
Have questions about your specific retirement plan? I'm happy to help! Schedule a meeting on my website at eurekawealthmanagement.com or call me at (760) 537-0791.
Happy New Year!
Sources: