Introduction
Take a look at your pay stubthe
part that shows how much is taken out for the various taxes and benefits
each pay period. One of those deductions is for Social Security and Medicare
taxes. On some pay stubs it's called FICA, which stands for Federal
Insurance Contributions Act, the law that authorized payroll deductions
for Social Security.
We thought you might like to know
what your Social Security taxes pay for and where the money goes.
Who Pays Social Security
Taxes?
You do, of course, but so do
more than 150 million other people. In fact, about 96 percent of all American
workers pay Social Security taxes. The tax rate is 7.65 percent of your
gross wages (6.2 percent for Social Security and 1.45 percent for Medicare).
In the year 2000, your employer withholds the full tax7.65 percentup
to a $76,200 wage base. If you earn more than $76,200, your employer continues
to withhold the Medicare portion of the Social Security tax, or 1.45 percent,
on the rest of your earnings.
Did you know that your employer matches
your tax payment dollar for dollar? The next time you look at your Social
Security deduction, double it, and that's the amount you and your employer
are paying into Social Security toward your future benefits.
(Self-employed people also pay Social
Security taxes. Their rate equals the combined employee/employer tax.)
What Do Your Social
Security Taxes Pay For?
Today, you're working and paying
Social Security taxes. Tomorrow may be a different story. Some people
plan for their retirement, but many of us don't give enough thought to
what would happen if we become disabled, or what would happen to our family
if we died.
That's why it's important for you
to know that your Social Security taxes are paying for a lot more than
just retirement benefits. In fact, you could
think of your Social Security taxes as a premium on a potentially valuable
insurance plan. Here's what you and your employer are buying with your
Social Security taxes:
- retirement coveragebenefits
paid every month to eligible retired workers as early as age 62;
- disability coveragebenefits
paid every month to eligible workers of all ages who have a severe disability;
- family coveragebenefits paid
every month to the spouses and children (including dependent adults
who have been disabled since childhood) of eligible retired and disabled
workers;
- survivors coveragebenefits
paid every month to the eligible widow/ widower and children of a deceased
worker; and
- Medicare benefitshelp with
hospital bills, as well as limited coverage of skilled nursing facility
stays, hospice care and other medical services at age 65 or younger
if you become disabled.
You can help guarantee that you're
receiving the proper credit for your work and earnings by checking your
pay stubs and W-2 forms. Make sure your Social Security number is correct
and that your name is spelled properly. If there are mistakes, show them
to your employer so they can be corrected.
Where Your Social
Security Taxes Go
Out of every dollar that workers and
their employers pay in Social Security taxes:
- 85 cents goes to a trust fund that
pays for monthly benefits to retirees and their families and to widow,
widowers and children of workers who have died; and
- 15 cents goes to a trust fund that
pays benefits to people with disabilities and their families.
Your Social Security taxes also pay
for administering Social Security. The administrative costs are paid from
the trust funds described above and are less than 1 cent of every
Social Security tax dollar collected.
The entire amount of taxes you pay for Medicare (1.45 percent of your
earnings) goes to a trust fund that pays for some of the costs of hospital
and related care of all Medicare beneficiaries. Medicare is administered
by the Health Care Financing Administration.
Social Security is one of the most
popular and successful of all government programs and enjoys broad support
from all sectors of our society. Most Americans recognize the need to
continue to provide a basic level of financial support and health care
to be elderly, to people with disabilities and to the survivors of workers
who have died.
What's In It For Me?
We want to help you plan your
financial future by providing estimates of the retirement, disability
and survivors benefits you and your family could be eligible to receive
now and in the future. If you are 25 and older and not already receiving
Social Security benefits, we will send you a Social Security statement,
You can expect to receive a new statement showing your updated earnings
records and your potential benefits each year about three months before
your birthday.
It is important that you check your statement each year because any missing
or unreported wages could affect your eligibility for Social Security
benefits or lower the amount of potential benefits. It's a good idea to
keep your W-2 forms and other wage records so you can verify the information
on your earnings and benefit statement, If you find a problem, contact
your local Social Security office right away and show us proof of your
actual wages so we can correct your record.
One way you can help avoid any problems is to make sue Social Security
has your correct name on file, If your name has changed due to marriage,
divorce or any other reason, contact Social Security so we can change
our records and issue you a corrected Social security card.
What's In It For All
Of Us?
In addition to your personal
stake in Social Security, we think it's important to consider the positive
impact the program has on our country as a whole. Think of the value of
Social Security in terms of the benefits it pays to the family of a fellow
worker who has died, to a relative who has cancer and can't work or to
a neighbor who's retired after a lifetime of hard work.
Social Security represents a pact
between generationsa financial and social commitment among people
of all ages. It guarantees a monthly income to current recipients and
ensures a base of financial support for future beneficiariesworkers
like you. As such, Social Security is one of the most important and far-reaching
investments that you and all Americans can make.
For More Information
You can get recorded information
24 hours a day, including weekends and holidays, by calling Social Security's
toll-free number, 1-800-772-1213. You can speak to a service representative
between the hours of 7 a.m. and 7 p.m. on business days. Our lines are
busiest early in the week and early in the month, so, if your business
can wait, it's best to call at other times. Whenever you call, have your
Social Security number handy.
People who are deaf or hard of hearing
may call our toll-free TTY number, 1-800-325-0778, between 7 a.m.
and 7 p.m. on business days.
We treat all calls confidentiallywhether
they're made to our toll-free numbers or to one of our local offices.
We also want to ensure that you receive accurate and courteous service.
That is why we have a second Social Security representative monitor some
incoming and outgoing telephone calls.
Social
Security Administration
SSA Publication No. 05-10010
August 2000
(February 2000 edition may be used)
ICN 451459
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