This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speakers, are subject to change as market and other conditions warrant, and do not constitute investment advice or a recommendation regarding any specific product or security. There is no guarantee that any investment strategy discussed will be successful or achieve any particular level of results. Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks, including the potential loss of principal.

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John

Hello and welcome to the Portfolio Intelligence podcast. I'm your host, John Bryson, head of investment consulting and education savings at Manulife John Hancock Investments. Today is July 9, 2025. As always, the goal of this podcast is to help investment professionals deliver better outcomes for their clients and their practice. We know that investment professionals help their clients with a variety of financial decisions, like creating a financial plan, building investment portfolios, planning for college, and managing income and costs in retirement.

To help financial professionals with this endeavor, we have created our Practice Management Network. This includes topics that we've addressed prior on the Portfolio Intelligence podcast, like market updates through market intelligence, behavioral finance, college planning and admissions, understanding the needs of women investors, working with business owners, or when and how to leverage Medicare. One topic we have not touched upon, that's been gaining a lot of attention lately, is Social Security.

To learn more about this popular topic, and to give you a sense as to the depth of how we can help you with complicated topics, I've asked Brooke Baker, a practice management specialist at Manulife John Hancock Investments, to join the podcast. In Brooke’s role, she supports financial professionals by simplifying complex topics and delivering practical strategies to help them grow their business.

As I mentioned, one of the most popular topics we’ve helped people with recently is Social Security. Now, we can't cover the topic in its entirety, but I want to give our audiences a glimpse of how we can help them understand important financial topics and how to stay current on the evolving landscapes. Brooke, welcome to the podcast.

Brooke

Hi, John. Thank you so much for having me today.

John

You got it. I'm excited to talk about this one. So, tell me about the Social Security program we have here at Manulife John Hancock Investments.

Brooke

Yeah. So, we have an extensive practice management network here at Manulife John Hancock. Many of our programs you have already mentioned. Social Security is one of our most popular programs, since it is very complicated and it affects just about everyone in our country.

So, individuals are overwhelmed by the decision of when to take benefits, and they don't want to make any mistakes. Our program's goal is to help simplify and demystify Social Security. We want individuals to know what their options are, and that is a range of different benefits from individual benefits, spousal benefits, widow, divorce, and even children's benefits. We have some really great resources, and I'll share where individuals can find those resources at the end of the episode.

John

And like I said, there's a lot to cover here, but what I want to dig into is a more recent development impacting Social Security. And that's the completion of the Social Security Fairness Act of 2025. Can you tell us what the social Security Fairness Act is?

Brooke

Yeah. So, the Social Security Fairness Act of 2025 repeals two controversial provisions that were a part of Social Security. These provisions were the Windfall Elimination Provision or WEP, and the Government Pension Offset, or GPO. The Fairness Act was signed into law this year on January 5th by Joe Biden. It actually received bipartisan support in both the House and the Senate.

And although it was signed into law this year, 2025, it is retroactive to January 1st of 2024. So, for all intents and purposes, we can act like the law has been in place since January of 2024.

John

Okay, so you mentioned that they've both been repealed. Therefore they're no longer active. But let's discuss what they are. Can you tell us what the Windfall Elimination Provision is. And then we can get into the Government Pension Offset.

Brooke

Sure. So let me just start by saying these provisions only affected individuals that qualify for a government pension. So, if you do not have a pension from the government, then these provisions never affected you. For those that do have a government pension. Let's break down each of these provisions to see if you were affected by either of them.

So first I'll start with the Windfall Elimination Provision or WEP. Now WEP affects individuals who qualify for both Social Security benefits and a government pension. So let me share an example. Let's say I worked as an accountant for 20 years. And during those 20 years I paid into Social Security, right. So, every paycheck I received, I saw that 6.2% getting taken out for Social Security.

And just as a background to qualify for Social Security benefits, you must have worked and paid into Social Security for 40 quarters or ten years of work history. So, in my 20 years working as an accountant, I should qualify for Social Security benefits. However, later in my career I decided I want to go teach a high school accounting class.

So, I became a teacher. I got hired into a school system and I stopped paying into Social Security. And instead, I started paying into a government pension. Well now when I retire, I qualify for both Social Security and a government pension, which seems like the best of both worlds. But in 1983 WEP was put into place to reduce your Social Security benefits if you were one of these individuals.

So, for the last 41 years, these individuals received reduced Social Security benefits. And the calculation for this is a bit in the weeds. So, the main takeaway I want people to know is that WEP could have reduced someone's social security check by up to $613 a month. So, for example, if I would have qualified for a $2,000 a month benefit, that could have been reduced to just under $1,400.

I do want to add that this provision never affected individuals who made substantial earnings and paid into Social Security for over 30 years. So, if I'd been an accountant for 30 or more years before becoming a teacher, and the Windfall Elimination provision would have never affected me. And Social Security has changed the definition of substantial earnings over the years. So, in 2025, it was $32,700. But back in 1980 it was around $5,000 a year.

So WEP affected individuals who paid into Social Security for less than 30 years. But varying degrees, depending on the amount of years you worked and paid into the system, and if you had substantial earnings or not.

John

So, if I were to summarize, there is a subset of the population out there that was underpaid by the government…would be one way to think about it. Or has money coming due to them because the WEP has been eliminated and they need to be aware of this if they spent less than 30 years, working and contributing to the Social Security, is that a good way to summarize it?

Brooke

Yeah, that's a great way to summarize it.

John

So, let's dig in a little bit deeper. For over 40 years, individuals have earned both a government pension and Social Security benefits. They were affected and they received reduced benefits. But now it's been eliminated so they can receive their full Social Security benefit and their pension. What is the Government Pension Offset effect and how does that work? So how is that different.

Brooke

Yeah. So, you know the one I just covered was WEP the Windfall Elimination Provision. And then the Government Pension Offset—similar but different. So, GPO, Government Pension Offset, affected spouses or widows who had a government pension and wanted to claim spousal or widow social security benefits off of their partner's record. And while GPO is called Government Pension Offset, it's easier to remember that this affects spouses by calling it the Grumpy Partner Offset.

Now, I also want to share an example for this one that I think will help clarify a little bit. So let me tell you about my friends Jeff and Sheryl. Jeff worked as an electrician his whole career. He paid into Social Security. Sheryl was a stay-at-home mom. She raised two lovely children, and at the age of 67, Jeff retires, and he qualifies for a $2,000 Social Security benefit each month. Sheryl can claim a spousal benefit on Jeff's record and receive up to 50, sorry, 50% of Jeff's benefit or $1,000. So, everybody's happy, Jeff gets $2,000. Sheryl gets $1,000.

But now let's look at a slightly different scenario. Still with Jeff and Sheryl. Let's say after the kids reach middle school, Sheryl decided to go back to work. She got hired into the local school system as an office administrator. She started paying into a government pension. Now, at age 67, both of them retire. Sheryl goes to claim that spousal benefit, but this time she also has a government pension. And for the last 40 years, Social Security did not like that. So, they would actually reduce or even eliminate her spousal benefit.

And before I go into the calculation, keep in mind this is what Social Security just eliminated. So, it's no longer in practice. However, this is the category of individuals that were affected by the change of the Fairness Act the most.

So, what they used to do was they would take your pension—whatever that government pension was from, in this scenario, the school system—they would multiply it by two thirds, then subtract this amount from any spousal or widow benefits. So, let's say maybe Sheryl’s pension was around $2,000 a month. They'll take two thirds of that, which is $1,333, and then subtract that from her spousal benefit. But if you remember, her spousal benefit was only $1,000. So $1,000 -$1,333 is in the negative. And if you're looking in terms of Social Security, it's zero.

So, she would not have qualified for a spousal benefit at all. That is why she gets qualified as a very grumpy partner. But keep in mind, with the Fairness Act, we are repealing this provision. So as of 2024, Sheryl now qualifies for her full spousal or widow benefit.

John

Okay. So, if her benefit was reduced to zero, she probably never applied for Social Security in the first place. So, some people do, some people don't. What happens now that she's due this benefit.

Brooke

For individuals that were affected by GPO and never applied because of their benefit amount would have been zero, they are now due the payments they should have received starting in January of 2024, when the act was repealed. So, since these individuals never applied to Social Security, Social Security is allowing an exception to have these individuals be paid back.

And it is critical that if you were affected by this, you need to apply for Social Security benefits ASAP to make sure that you get that back pay.

John

So you mentioned widow benefits a couple times throughout this conversation as well. Did the GPO affect widows also?

Brooke

Yes, GPO did affect widows. So, widows qualify to get up to the full benefit of their deceased spouse. So, in Sheryl's case, while she may not have qualified for a spousal benefit, if Jeff were to pass away we would then subtract that $1,333 from Jeff's full benefit at the time of his death. For simplicity's sake, we'll say that his benefit at the time of death was $2,000.

So, she may be due now $666 a month. Now, in 2024 and moving forward, she would get that full $2,000 since there is no more government pension offset and there are no more grumpy partners.

John

So bring us up to today. Now that both of these provisions have been eliminated, what happens to the impacted individuals?

Brooke

Yeah so now that both of these provisions have been eliminated in February and March of this year, 2025, Social Security made one time retroactive payments to individuals that were receiving lower benefits due to WEP and GPO. This will be a retroactive payment for the money that they were due between January of 2024 to February of 2025.

Starting in April of 2025, all payments moving forward should reflect the new higher amount that they are due. However, keep in mind it may take, Social Security estimates maybe until November to get everything fully up to date. A lot of what they do is done manually, so sometimes it does take a bit of time for them to complete all of these changes.

But for individuals affected, you should have received a notice in the mail, about this change and that you're affected by it. So if you did not receive a notice in the mail, especially if you were affected by GPO, you should call Social Security right away and make sure they update all of your information and get you that back pay.

John

Okay. So if you got that notification from the Social Security, you know about it. And hopefully you got the payment in your set. For those of you that didn't get a payment, you might be owed one. You need to reach out to the Social Security department. But let's help the audience here. How many people are affected by this change?

Brooke

So it's estimated between 3 to 4 million people are affected by this change. And this primarily affects individuals in a few states. So, it mostly affects individuals in Texas, California, Massachusetts, Colorado, Ohio, Louisiana, Georgia and Illinois. And as you can see, there's a mixture of Republican and Democrat states. That is one reason why it received bipartisan support. The reason this does not evenly affect all states is because in some states, government employees actually pay into Social Security and they don't receive a government pension at all.

So, they were never subject to WEP or GPO. However, 14 states still use pensions for some or all of their government employees. I know I've been using the school system for a lot of my examples. But this affected all government employees, including firefighters, police officers, any sort of federal employee, and even foreign government workers.

John

So, what are the anticipated long term effects of the Social Security Fairness Act on the Social security system and its beneficiaries?

Brooke

So, before we talk about how the Fairness Act will affect Social Security, I want to start off with a little bit of background. So as many of us are aware, Social Security appears to be in financial trouble. In 2021, we started paying out more in benefits than we collected in taxes that year. Fortunately for us, in the 90 years that Social Security has been around, we have built up a surplus of revenue for the many years that they actually collected more in taxes than we paid out.

And this surplus of funds was moved into a trust. And we are now drawing down on that trust and it is projected that we may run out of money in the trust sometime around the year 2034. However, that projection often changes. Every single year we make slight adjustments to Social Security, which tend to move that projection out just a little bit every single year.

But these legislative changes are really just kicking the can down the road. Larger changes will need to be made, and most experts agree Social Security will likely remain in place in some form or another. It's been around for 90 years. It's very well established. And while this isn't the main focus of today's podcast, I do want to give some reasons as to why Social Security is currently in financial trouble.

I think it'll give some good background as to the changes we're seeing now. So as I mentioned, social Security has been around for 90 years, and we need to give some amount of credit that a government program has successfully stuck around for that long. In the 1930s, when it was created, over half of all elderly individuals were living in poverty.

Today, that number is closer to 10%. So, it's been pretty successful in its mission of getting elderly individuals out of poverty. But when it was first created, it was intended to provide benefits only to retirees who paid into the system. Today, we give benefits to spouses, ex-spouses, widows, individuals with disabilities, and even children. So, there are a lot more people collecting benefits and drawing off of the system than there were in the 1930s.

On top of this, people are living a lot longer. In 1930, the life expectancy was close to 65 years old, and today it's almost 80 years old. So Social Security has to pay benefits out for a lot longer period of time. So now that we have some background, how does the Fairness Act of 2025 affect Social Security? Well, it actually could add some additional strain on the system as we are now paying out even more in benefits, than we were before.

So for WEP individuals, the average increase is around $300 per month on average. And for GPO, it's between $700, which is the average increase for a spousal benefit, and around $1,200 extra a month for survivor benefits. Multiply all those numbers by the 3 million people affected, and we're going to be paying that out for, you know, however many years those individuals are living to.

We don't have an exact number of how it will affect Social Security, but it does add an additional layer of challenges, for the extra amount that Social Security will be paying out moving forward.

John

All right. So this is really interesting yet rather complicated. If listeners want to learn more, especially those that are collecting Social Security, where can beneficiaries find more information or help regarding the changes that we're discussing?

Brooke

The first place I always recommend people go is to log on to ssa.gov. If anyone listening to this has not logged on to ssa.gov, absolutely do so. It doesn't matter if you are 25 years old or 65 years old, it's important to log on. It's the first place you'll go to see your earnings history and your estimated benefits if you start benefits at age 62 versus 70 years old. So, they're really going to have a lot of information on there. It's a surprisingly easy website to navigate, for a government website.

And if you still have additional questions, you can always call Social Security. Their number is 1-800-772-1213. Or you can visit a local social security office.

And especially if you're affected by GPO and you're one of those grumpy partners, I recommend calling the Social Security Office to ensure that you're getting that retroactive pay that you were entitled to.

John

And, Brooke, as you know, a big part of our audience for the Portfolio Intelligence podcast in Manulife John Hancock Investments is investment professionals. If investment professionals looking for more help on this topic or other complicated topics—what do you recommend?

Brooke

Yeah, Social Security is complicated and there is a lot that we were not able to cover today. So, if you do have additional questions, we encourage you to reach out to your Manulife John Hancock wholesaler. They are ready to assist and provide helpful resources. My favorite resource that we have on Social Security is a client friendly Q&A document or guide.

It really goes through the basics of Social Security, a lot of things that we weren't able to cover today. It goes through everything from what is Social Security, what is full retirement age. And it does it in that nice, question and answer format. You can access this guide on our website at jhinvestments.com. Or your wholesaler can order nice printed copies directly to your office.

John

Excellent. Well, Brooke, I want to thank you for joining us today. We're always trying to bring compelling intel to our audience, and I think this was certainly one that people will appreciate and we hope that they reach out for more information. So, thanks for joining me today.

Brooke

Thank you so much for having me today, John.

John

Folks, if you want to subscribe, as always, please do so on iTunes or you can visit our website jhinvestments.com. You can learn more about Social Security and all things investing and great business building ideas are available there and much much more. As always, thanks for listening to the show.

John

This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member, FINRA, SIPC. The views and opinions expressed in this podcast are those of the speaker are subject to change as market and other conditions warrant and do not constitute investment advice or a recommendation regarding any specific product or security. There's no guarantee that any investment strategy discussed will be successful or achieve any particular level of results.

Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks including the potential loss of principal.