Social Security Administration
Your Taxes...What They're Paying
For And Where The Money Goes
Publication Number 05-10010
January 1999
ICN 451459
Introduction Take a look at your pay stub—the 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. This leaflet explains that. Who Pays Social Security Taxes? 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? 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:
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. What's In It For Me? We encourage you to request this statement at least once every three years to check your benefits and to make sure your earnings are properly recorded in our files. It's important that you do this 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 sure 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? Social Security represents a pact between generations—a 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 beneficiaries—workers like you. As such, Social Security is one of the most important and far-reaching investments that you and all Americans can make. Where Your Social Security Taxes Go
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 one 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 the elderly, to people with disabilities and to the survivors of workers who have died. Your Social Security Number The Social Security Administration is aware of concerns about the increasing uses of the Social Security number for identification and recordkeeping purposes. If a business or other enterprise asks for your Social Security number, you can refuse to give it to them. However, that may mean doing without the purchase or service for which your number was requested. Also, your employer should not display your Social Security number on an identification badge or in any other public format. Our primary message: be careful with your Social Security number and protect its privacy. Your Own Social Security Statement For More Information 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. The Social Security Administration treats all calls confidentially—whether 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. |