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Social Security Tax Withholding - What do YOU Pay? - YouTube
Channel: Let's Not Be Fools
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- Are you aware of how much
in Social Security taxes
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you pay each year?
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Well, I'm gonna tell ya.
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And I'm also gonna tell you about a change
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that was made in 2017 that
you might not be aware of.
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Stay tuned.
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(quirky electronic music)
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Hey, this is Matt from Let's Not Be Fools,
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the channel that brings you
financial and other advice
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a couple times a week.
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Make sure you subscribe
so you don't miss a thing.
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Let's talk about Social Security tax.
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Every time you receive a
paycheck from your employer,
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you should get a breakdown
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of all the taxes that were withheld
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from that pay for that period.
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If you look closely at that breakdown,
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you may see a section that
says FICA or maybe SSI
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or whatever they may call it,
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but that is your Social Security tax,
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and FICA may also include
your Medicare tax as well.
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So, just know that your
Social Security tax
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is 6.2% of your wages earned
and your Medicare tax is 1.45%
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of your wages earned on top of that,
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but we're here just talking
about Social Security.
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So, we're gonna talk about
your Social Security wage base;
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how much of your annual income
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is actually subject to
Social Security tax.
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Here is a table that I downloaded
from the SSA.gov website.
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You'll see that in 1937 to 1950,
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the amount of income that
was subject to SSI tax
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was just $3,000.
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But, of course, $3,000 back then
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got you a lot more bang for your buck.
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And then, all the way through 2019.
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Now, the income that is
subject to SSI tax is $132,900.
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In this table, I just wanted to zero in
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on a shorter time period,
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so I took the years 2006 through 2019.
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I show the amount that is
subject to SSI income tax.
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I also show the increase year-over-year
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of that taxable amount,
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and you'll see that it
varies year-over-year.
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And in the right-hand column,
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I just wanted to show the
cost of living adjustment,
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the COLA, that is applied
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to those who are receiving benefits now.
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So, every year, they get an adjustment
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of how much they receive,
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and year-over-year it normally increases.
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And this COLA is the
cost of living adjustment
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that reflects that increase
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in the amount that they get each year.
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I just wanted to add this in here
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so we could see the
difference between the COLA
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and how much our taxable wages
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are being increased each year.
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When you look at the amounts
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that are taxable year-over-year,
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you'll see in 2006 it was $94,200
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of your income that was taxable.
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And it just slowly gradually
goes up pretty steadily
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and it's even flat in
years 2009, '10, and '11,
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due to the financial crisis
of 2008, most likely.
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But you'll see in 2017, it
took a significant jump.
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It jumped from $118,500 up to $127,200.
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That's a 7.3% increase.
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Then the next year it just went up .9%,
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and then in 2019 it jumped another 3.5%.
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You'll see on the COLA side,
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the adjustments for 2017, 2018,
and 2019 were pretty modest:
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.3%, 2%, and then 2.8%.
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So, you can see the COLA adjustments,
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that is the adjustments of the payments
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that are going out to current recipients,
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are more modest than the
hikes in the amount of income
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that are taxable in that other column.
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So, you can see the government
is being much more aggressive
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in how much income is taxable
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versus how much they
are willing to pay out
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via the COLA adjustment.
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And it's definitely
something they need to do
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because they're paying out more benefits
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than money that they're taking in.
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So, this is one of the measures
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of how they're going to
increase the amount of income
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going into the SSI fund;
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that is, by raising the
limit on the income levels.
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And I'm very sure we'll
see an aggressive increase
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in that amount subject to SSI tax.
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In year 2020, 2021 and beyond,
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I'm sure we'll see that
$132,900 will go up
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much more significantly,
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so we'll be paying in
much more of our income
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into the SSI tax fund
as they try to offset
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the amount of money that is going out
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to those receiving benefits right now.
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So, again, your SSI tax
is 6.2% of your wages,
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so if you're earning $100,000 in a year,
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your SSI tax for that year is $6,200.
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And that's over and above the
normal income taxes you pay
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to the federal government
and to your state government
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and local governments,
if you have to pay those.
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Every year, the Social
Security Administration
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makes available to you
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a summary of your potential
benefits in the future.
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If you do review your statement,
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you may see this little blurb,
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this little asterisk that
says something like this.
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"Your estimated benefits
are based on current law.
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"Congress has made changes
to the law in the past
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"and can do so at any time.
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"The law governing benefit
amounts may change because,
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"by 2034, the payroll taxes
collected will be enough
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"to pay only about 79%
of scheduled benefits."
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So, they are saying that they
can pretty much only pay you
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79 cents on the dollar that they owe you,
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and that's not fair, but
I think that'll change.
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There will definitely be some legislation
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that would modify that before 2034 comes;
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I believe so anyway.
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If you're not monitoring your
annual benefits statement
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from the Social Security Administration,
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I encourage you to do so.
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Here is the website where you can sign up
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to get your statements annually.
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I will also put a link down
below so you can click on it
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and easily go right to
that SSA.gov website.
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It's an easy thing to do.
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It's a cool statement to
take a look at every year,
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just to see where you are
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and what your potential benefits are.
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I encourage you to do it.
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I hope that was helpful.
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I just wanted you to be aware
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of how much you're actually paying
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into the Social Security system.
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Have a great day.
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