More than 2 million Americans saw a Social Security benefit boost this month thanks to the Social Security Fairness Act. If you're one of them, you're probably excited to have the extra cash. Even a few hundred dollars extra per month could make a huge difference, especially if you're heavily dependent on your checks.
You're probably thinking about what you can do with your extra money. But that's not the only thing that deserves your attention. Carve out some time to take the following three steps as soon as you can.
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1. Verify that your new benefit aligns with expectations
Before receiving your Social Security benefit increase, you should have received a notice from the Social Security Administration telling you what your new checks would look like. How much more you get depends on earnings history and benefit type.
The average retired worker affected by the Social Security Fairness Act should get around a $360 monthly increase. Spousal beneficiaries and widow(er)s should see average monthly increases of $700 and $1,190, respectively. Yours likely won't hit the average perfectly, but this should give you a ballpark of what to expect.
If the benefit increase you received in April doesn't correspond with what the Social Security Administration told you you'd receive or if you believe your new benefit wasn't calculated correctly, reach out to the Social Security Administration for clarification. You can do this by phone, email, or in person at a local field office.
2. Review your retirement budget
You may already have some ideas about what you want to do with your extra Social Security checks. You could use the extra money to afford a higher standard of living today or pay off debts if you have any. In these situations, you may continue to withdraw the same amount of money from your personal retirement savings each month.
But if you're worried about running out of savings prematurely, you could also reduce your retirement account withdrawals by the amount of your Social Security benefit increase. This could help you stretch your dollars further. It may also reduce your risk of jumping up to another tax bracket.
There isn't a right or wrong answer here, but it's important to understand how the extra money could affect your finances in the short and long term.
3. Figure out if you'll owe Social Security benefit taxes
A substantial increase in your monthly Social Security benefits could increase your risk of owing Social Security benefit taxes. If you've owed them in the past, you could lose even more to the government going forward. Some people could owe ordinary income taxes on up to 85% of their benefits. This could add up to thousands of dollars.
Sometimes, it's possible to avoid this by reducing how much you withdraw from tax-deferred retirement accounts, like traditional IRAs and 401(k)s. This reduces your adjusted gross income (AGI), which plays a role in how much you owe in Social Security benefit taxes. But this isn't a feasible workaround for everyone.
If you expect you'll owe benefit taxes, you can either set aside money for the tax bill yourself or you can request that the Social Security Administration withhold money from your checks upfront. Consult with an accountant if you're not sure about your best move.
Even if you don't owe Social Security benefit taxes this year, you could owe them in future years as your benefits rise due to cost-of-living adjustments (COLAs). So always remember to plan for this tax, if necessary, when creating your retirement budget for 2026 and beyond.
