What’s FICA got to do with it? You’ve heard of “FICA” and most of us have a vague idea of what it is. Something to do with money being taken out of our checks and “it’s highway robbery I tell ya” etc. I’ll be honest. That’s about all I knew about it until my guilt ridden conscience had to research and research until I could come up with concrete evidence that I was not indeed a bum, a leach on society for collecting this disability benefit.
First, FICA = the Federal Insurance Contributions Act. It’s a payroll tax. If you look at the breakdown of your paycheck and you see Social Security and Medicare deductions…that’s it. It means that 12.4% of earned income up to an annual limit (currently $110,100) must be paid into Social Security, and an additional 2.9% must be paid into Medicare. There are no earned income limits on Medicare taxes, so even if your salary is well above the cap for Social Security tax, you will still owe Medicare tax on your total earned income.
I remember when I was younger shouting along with all my other co-workers about the unfairness of how much “They” were taking out of my already little checks, but now…I get it. I don’t think of it so much as a tax anymore, but an investment. All these years I’ve been socking my money away to an undisclosed location (even to me), saving up for a rainy day called disability and the other rainy day called retirement and because of that, I am able to cover my rent and basics every month. Because of it, I will have health insurance from next year until the end of my life. Pretty sweet when I see it that way.
Here’s another bonus about working for “The man”. If you’re a wage or salaried employee, you pay only half the FICA bill (In 2012, 4.2% for Social Security plus 1.45% for Medicare). Your employer contributes the rest~
If you’re self-employed, however, you’re expected to fork out both the employee and the employer share of FICA, but you get to deduct half of this self-employment tax as a business expense, so not so bad being your own boss either~
So, next time you hear someone bitching about FICA and how it takes half their hard earned pay, let em know about the rainbow on the other side and before you think of yourself (or others) as a bum for being on SSDI, remember that this is something you’ve been paying into your whole working life. An insurance if you will and you’ve earned it (literally and figuratively).