I'm a financial idiot. I admit it and have no qualms about it. I was looking into exactly how much we (wife ad I) pay in taxes and, like I would assume most people would react, was more than nonplussed. My moron question is: What do I get out of FICA taxes in thirty someodd years? Is there an income or wealth cutoff? Is my return based on what I put in? Do I get what everybody else that qualifies gets? I ask because I'm a greedy bastard and I would like to gauge the extent of the screw job I have no doubt the gov't is putting on me. My retirement would be planned several years in the future if my FICA "contributions" went to a private investment fund and not to the morons in Washington.
OK. So I get nothing back. Are you trying to make me feel better by noting that other people have been fleeced as well? Note, I am not rich. We watch all the purchases we make with an eye towards the future. It just frustrates me to realize that a substantial portion of our earnings are given up yearly, directly leading to more years of me spending 10-14 hours a day in an office, doing things I hate.
I didn't initially think I was trying to make you feel better - but in retrospect it seems I was. My wife is in real estate. She gets paid when her deals close. Sometimes she has huge months and on those months me are real excited. Then the check rolls in. ****. they tax her as if she makes that kind of money every two weeks. The government then keeps it for several months (interest free mind you) and we get it back when we do our taxes. It chaps our *** so much every single time it happens. So believe me, I understand where you are coming from. I was just pointing out that yeah, even though it sucks, it could be worse.
Oh my goodness. FICA is Social Security, not income tax. Let's pretend dendox's post does not exist for the moment. I haven't kept up with the actual numbers over the years, but basically, you're paying roughly 6% in FICA (and another 1.5% or so in Medicare) every month. If you are employed, your employer matches that. If you are self-employed, you match it yourself - do the math, that's around 15% although there are some offsetting credits available at the end of the day. And you still have income tax ON TOP of that. You pay this on every dollar you earn up to an annual maximum. Don't quote me on it but iirc it's somewhere in the neighborhood of $90K per year? I'm too lazy to look it up right now. So, after that 90K or whatever the cut off is, you don't have to pay FICA anymore. What do you get out of FICA? Well, that's like askng the NCAA to explain the BCS formula. It's very complex and depends on a lot of things. Basically, yes, the more you put in, the more you will get out, but it's something along the lines of Ross Perot getting $1800 a month and McDonald's fry cook getting $1600 a month. In other words, no, you're not going to get out anything nearly in relation to what you put in, or what you would have made in even a crappy self directed private account such as a 401K. SS long ago surpassed any semblance of being a "retirement plan" - if in fact it ever was intended to be anything more than a wealth transfer from young to old to begin with. Say what you will about GWB, but at least he tried to implement some meaningful reforms in this area. He learned the hard way why it's called the Third Rail of Politics.
FICA is indeed the money that goes to Social Security. Right now the money that you put into FICA is really paying for people who are drawing Social Security today. If you go to the Social Security website, they have a calculator that will estimate your benefit when you get to retirement age. www.ssa.gov/planners/calculators.htm It is based on your annual wages for certain period of time. Not sure what the cut-off is, but there is a cap on the amount of your pay that gets deducted as FICA. So during the year, and if you earn enough, you will see a point at which FICA stops being taken out of your paycheck. Oh and I guess I should have read Guapo's post first because he is spot on.[
FICA is social security and medicare. You will get plenty of returns on the investment you make monthly in these two plans. Because of increasing numbers of surviving retirees, the age these benefits kick in will have to be raised, but you will still get a nice retirement benefit from them. As to whether you would get a better benefit from a private investment, some people would, and some people would lose every nickel depending on the expertise of each individual in investing, and whether they get fleeced by phony hucksters, or natural downturns in the economy at the wrong time. Those people would then become welfare cases, on the tax rolls at your expense, just like some people feel about FICA taxes.
You will get the money back eventually, if you live long enough. People talk about the system going bankrupt. One way or another it will be funded. If you max out the FICA SS amount each year, you will get the max available given your retirement age.
If you make any real money over your lifetime you will not get an equal return on what you have contributed because the higher your income the smaller the percentage of your income is replaced. Additionally, I would presume that you are fairly young. If that is the case you can not draw your full "retirement" benefit until I believe you are 70. Might be 70 1/2, but what is 6 months right? You can begin to draw the benefit sooner at I believe 62, but if you do it is actuarially reduced and 8 years of reduction will truly whittle down the benefit. As pointed out, FICA was established as a transfer benefit so in effect the money you contribute pays for those now receiving the benefit. For those that say not to worry about your benefits in the future just be so sure. If the recent trend seen in Europe in regards to the pension systems over there follow here you can expect a smaller benefit. Bottom line is that at this time you have no choice in contributing, but you do have a choice when it comes each election. Make it known loud and clear that Washington better start doing something fast about the national debt because until that issue is resolved the future of things such as FICA are very much in doubt.
Both of my grandparents died over the last couple years. They both enjoyed a very comfortable, but certainly not extravagant retirement of 20+ years. This would not have been possible without social security. My grandmother graduated from high school in 1935 and the very next week went to work as a secratary at Kodak. Forty plus years later she retired from Kodak with a pension of about $800/month plus some really good health benefits. My grandfather had 40+ year blue collar career as a factory manager for 3M and Kodak. He too retired in his mid-60's with a modest pension of $1,000/month or less. The social security benefits they collected over their extended retirement made the difference between living in poverty and living comfortably. I am fully aware of the fact that every dime they collected from Social Security over the years was deducted from someone else's paycheck. I'm glad working Americans as a whole were (involuntarily) generous enough to share their bounty with my grandparents. I'm happy to share some of my resources with today's retirees if that what it takes to allow them to retire with some small bit of dignity. I do have issues with the cost-benefit ratio on the money Medicare spends keeping old people alive longer than necessary, but that's a separate issue. Bernard
The latest statement I got from Social Security states that by the year 2040, the fund will only be about 75% funded if Congress does not change something. The only easy way to change, which has been done gradually over the past, is to raise the age at which benefits start kicking in. I believe this will be done to keep the system afloat. The system is not bankrupt. The health care system is another matter. I don't know how they are going to salvage that mess (Medicare, Medicaid, and the perscription drug benefit plan).
