Here at Benefit Financial Services Group (BFSG), we are beginning to have conversations with clients who were previously impacted by Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). The immediate focus is on the best uses for the one-time retroactive payment that most will receive in March. According to the Social Security Administration (SSA), the average retro payment is about $6,700¹. Since Social Security benefits are paid a month behind, most people will start seeing their new monthly amount in April 2025 (for their March 2025 benefit). Anyone whose monthly benefit is adjusted or who gets retroactive payment will receive a notice in the mail from the Social Security Administration explaining the changes. The Social Security Administration is asking everyone to wait until April before inquiring about their retroactive payment status, as these payments will be processed gradually throughout March. They also suggest waiting until after you receive your April payment before contacting them about your new monthly benefit amount.

For many retirees, this lump-sum back payment and the bump in monthly income come at a critical time, as everyday costs remain high. Here are some ways recipients can best utilize their retroactive Social Security payments to strengthen their finances:

• Pay Down High-Interest Debt: If you’ve accumulated credit card debt or other high-interest loans to cope with rising expenses, consider using part of the lump sum to reduce or eliminate that debt​.
• Boost Emergency Savings: It’s wise to set aside some of this windfall for emergencies. Many seniors have had to dip into savings due to inflation. The retroactive funds you receive can help build an emergency cushion to protect you against unexpected expenses (like medical bills or home repairs) and prevent you from going into debt when surprise costs arise​.
• Cover Deferred Expenses: You can allocate part of the money to catch up on any essential expenses you may have been putting off. For example, you might address health care needs (get dental work or new glasses) or perform maintenance on your home or car that was delayed due to tight finances. Using the funds for these needs can improve your quality of life and potentially save money in the long run by fixing issues before they worsen.
• Help loved ones: If your immediate needs and emergency fund are in good shape, you may want to use the proceeds to help loved ones who could use some financial support. Perhaps a family member could use some of the money to pay down debt or get medical procedures completed.
• Invest for the Future: This could help your nest egg grow and provide additional income down the road. Even relatively conservative investments or savings could offset inflation over time. The key is to ensure the money continues to work for you in a way that aligns with your risk tolerance and needs. Consulting a financial advisor can be helpful if you’re unsure about the best investment choices for your situation.

In addition to the lump sum, make the most of the higher monthly benefit. For instance, you can reassess your monthly budget now that your Social Security check will be larger. The extra few hundred dollars (or more) per month can be used to ease month-to-month cash flow pressures (covering rising costs of food, gas, or utilities), so you don’t have to draw down savings as quickly. Some retirees might choose to allocate a portion of the new monthly income to recurring expenses like medications or insurance premiums and perhaps set aside a bit each month into savings if possible.

Overall, use this increase to restore financial balance in your life. After years of tighter budgets under WEP/GPO reductions, you can now breathe a bit easier knowing you’ll have a more adequate Social Security income to count on.

Next Steps:

1. If you’ve already applied for Social Security benefits, you don’t need to do anything extra to receive the additional benefits. If you haven’t applied for individual, spousal, or survivor’s Social Security retirement benefits because of WEP or GPO, you might need to file an application to receive the additional benefits. You can start the application process at ssa.gov/apply.
2. To understand how the new act might affect your benefits, call 1-800-772-1213 Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When prompted, say “Fairness Act.” You’ll be connected to a representative trained in WEP-GPO to assist you.
3. Consult with your financial professional and accountant to discuss how the additional benefits from the Act could impact your retirement planning and taxes. They can help you navigate these changes and optimize your strategy.

Source:

1. https://blog.ssa.gov/social-security-pays-billions-of-dollars-in-retroactive-payments/#:~:text=the%20Social%20Security%20Fairness%20Act,payment%20so%20far%20is%20%246%2C710

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