Cap on social security tax

[azucena]

I learned something new today when I realized my net paycheck was about $50 too high. Did you know there is a max on social security tax? It's $7886.40 for 2017. Its 6.2% up to a max salary of 127,200. I had no idea. Seems like I should continue paying my share.

I'm not sure of my point in this thread other than it's not something I can discuss with anyone in real life. I completely understand that I am truly blessed.

This in combination with Dec being a 3 paycheck month for me which means my third check won't have the typical deductions for insurance and medical and daycare reimbursememt so my net check will increase by $600.

The next 2 checks will be roughly $275 higher without the social security tax.

Along with this being the second year of maxing my 401k which will happen in the second Dec check which means the third net check will be about $650 higher.

It's mind boggling to me how finances begin to steamroll ahead once you get past a certain income if you don't increase spending.

And don't worry, in true YM fashion I'm going to use the excess to payoff my remaining student loan. My husband was appropriately horrified because he was picturing an increased Christmas budget.

[milee]

"Seems like I should continue paying my share."

With an AGI over $100,000, you're already in the earnings group that pays approximately 80% of all federal income taxes collected.  And your SS tax may be capped, but the amount of SS you will be able to draw is also capped (and most high earners will pay in more than they take out.)  You're paying a fairer share than most tax payers.  

[Deleted]

Do not feel guilty at all.  I was in that category for most of my career- that's harder now because the cap has been raised over the years, far more than inflation would dictate.  As milee says, the SS formula is stacked in favor of low-income earners.  They go through a formula to find your average indexed monthly wage over your career ("Indexed" means they try to express it at current dollar levels).  The SS benefit is then 90% of the first $895, plus 32% if the rest up to $5,397, plus 15% of any amount over that.  You can see that you don't get much back from the higher SS tax amounts you (and your employer) contribute.  Consider also:

1.  You and your employer will have paid multiples of the Medicare taxes the average worker pays over a career.  Everyone gets the same coverage.

2.  If you have any income other than SS, up to 85% of your SS is taxable by the Feds.  Since states love free money, most states do not exclude the taxable portion of your SS from state taxable income.   This year, 18% of my SS will be clawed back in the form of state and local taxes.

3.  Look up IRMAA.  Not only do you not get Medicare coverage any different form the rest- if you're a high-income retiree, you pay extra premiums for Medicare B and Medicare prescription. 

Enjoy your temporary relief from SS contributions.  You earned it!

[TheOtherMe]

Personally I think all earnings should pay SS tax as well as Medicare taxes.  I paid in to Social Security and will never see a dime due to the offset provisions from being a federal employee.  I have worked more than 40 quarters, but not made enough to draw a dime after the offset.  

We all have our problems.  

[azucena]

Dec 1, 2017 18:55:05 GMT -5 milee said:

"Seems like I should continue paying my share."

With an AGI over $100,000, you're already in the earnings group that pays approximately 80% of all federal income taxes collected.  And your SS tax may be capped, but the amount of SS you will be able to draw is also capped (and most high earners will pay in more than they take out.)  You're paying a fairer share than most tax payers.  

Oh I completely understand that I'll never see most of it back. I'm 38 so not really even counting on social security, it will be a nice addition if it's still paying out.

[Phoenix84]

Dec 1, 2017 20:50:38 GMT -5 TheOtherMe said:

Personally I think all earnings should pay SS tax as well as Medicare taxes.  I paid in to Social Security and will never see a dime due to the offset provisions from being a federal employee.  I have worked more than 40 quarters, but not made enough to draw a dime after the offset.  

We all have our problems.  

How does that work? Under the old civil service retirement system you didn’t pay and didn’t get social security. If you’re under FERS, like me, you pay for it and get it. At least in theory, if it’s not bankrupt by then.

[TheOtherMe]

I worked over 40 quarters since retirement.  Only 4 quarters are at the full amount (or whatever it is called).  That means what I could receive will not exceed the WEP.  I never paid in to social security during the years I worked for the federal government.  I have paid in since I retired but will never draw a dime.

I have paid in to Medicare (once the law changed for federal employees) and pay my Part B premiums so I am covered by Part A and B.  

I was offered a buyout at a pretty young age and took it.  

[jkapp]

Uncapping the SS wages is a popular idea, but the way SS is currently set up would make it a disaster.  Not just because of the fact that benefits are tied to deductions, either.  Any excess money going into SS (the so-called "Trust Fund") gets sent to the general fund of the government, which then spends it on other shit.  This, then, creates a whopper of a debt that the government (i.e. taxpayers) will have to pay off someday in order to fulfill the benefits.

So in theory uncapping the wages sounds good, but when you see how the government totally mismanages the SS program, you can see it is a pretty horrible idea.

[souldoubt]

If you feel so inclined to pay more to the government you can always send them a check.  I have no desire to give more to the state or feds so that they can mismanage that along with the other revenue they bring in.  To echo what others said people who make less and live longer have been getting far more out of the system than they ever put in and as someone in their mid 30's I don't count on anything out of SS.  Instead of figuring out how to tax citizens more our government should learn to make do with what they bring in, not raid SS or other funds for their pet projects and the list goes on.  Obviously that's a pipe dream but 4+ decades of deficit spending isn't going to end well and sooner or later they won't have any choice but to make draconian cuts.

[Deleted]

Dec 1, 2017 18:55:05 GMT -5 milee said:

"Seems like I should continue paying my share."

With an AGI over $100,000, you're already in the earnings group that pays approximately 80% of all federal income taxes collected.  And your SS tax may be capped, but the amount of SS you will be able to draw is also capped (and most high earners will pay in more than they take out.)  You're paying a fairer share than most tax payers.  

Yeah. Your percentages are off. files.taxfoundation.org/20170201091804/TaxFoundation-FF540.pdf