Receiving your first paycheck is an empowering milestone. Do you remember being a little shocked by the taxes that Uncle Sam takes out of each paycheck? Understanding how important your contribution is takes some of the sting away because your taxes are helping millions of Americans — and financially securing your today and tomorrow.
By law, employers must withhold Social Security taxes from workers’ paychecks. While usually referred to as “Social Security taxes” on an employee’s pay statement, sometimes the deduction is labeled as “FICA.” This stands for Federal Insurance Contributions Act, a reference to the original Social Security Act. In some cases, you will see “OASDI,” which stands for Old Age Survivors Disability Insurance, the official name for the Social Security Insurance program.
The taxes you pay now mean a lifetime of protection — for retirement in old age or in the event of disability. And when you die, your family (or future family) may be able to receive survivors benefits based on your work as well.
Right now you probably have family members — grandparents, for example — who already are enjoying Social Security benefits that your Social Security taxes help provide. Social Security is solvent now and will be through 2033. At that point, we’ll be able to fund retirement benefits at 75 percent unless changes are made to the law. In the past, Social Security has evolved to meet the needs of a changing population — and you can count on Social security in the future.
Because you’re a long way from retirement, you may have a tough time seeing the value of benefit payments that could be many decades in the future. But keep in mind that the Social Security taxes you’re paying can provide valuable disability or survivors benefits in the event the unexpected happens. Studies show that of today’s 20-year-olds, about one in four will become disabled, and about one in eight will die, before reaching retirement.
Be warned: if an employer offers to unlawfully pay you “under the table,” you should refuse. They may try to sell it as a benefit to you since you get a few extra dollars in your net pay. But you’re really only allowing the employer to deprive you from earning your Social Security credits. This could keep you from qualifying for any benefits, or result in you receiving less than you should.
Also, don’t carry your Social Security card around with you. It’s an important document you should safeguard and protect. If it’s lost or stolen, it could fall into the hands of an identity thief.
Check out our webinar, “Social Security 101: What’s in it for me?” The webinar explains what you need to know about Social Security. You can find it at http://go.usa.gov/cdNeY.
If you’d like to learn a little more about Social Security and exactly what you’re earning for yourself by paying Social Security taxes, take a look at our online booklet, How You Earn Credits, at www.socialsecurity.gov/pubs/10072.html.
You can also learn more at www.socialsecurity.gov.
Marcus Geiger is Social Security district manager in Gallipolis, Ohio.