Do you understand how Social Security and Medicare work?
I enjoyed a discussion on someone’s feed today and, while we were not able to reach an accord on the “how”, we have the same goals in mind.
It is because of a comment made there that I decided to bring the discussion to my page.
One of the comments was Medicare “really is not funded by our taxes”.
Which made me wonder how many others do not understand what is taken out of employee wages.
If you look at your pay stub you will see something called “FICA”. This stands for “Federal Insurance Contributions Act”. Started in 1935 it was meant to fund Social Security (to live on) and Medicare (for health insurance) in your retirement. It also covers people with specific conditions and children of deceased workers.
Basically, you pay 7.65% of your salary (up to a limit- currently $137,700) and your employer pays an equal amount for a total of 15.3%.
Because self-employed workers do not have an employer to sponsor them, they pay the entire 15.3%, but are able to expense 7.65%.
Now, these funds are not kept in an account just for you. They are put into a big pot that is currently funding those already drawing down the funds. Future generations will pay for your benefits, assuming the program is still functional at that time.
If you are paying 7.65% to 15.3% of your income to fund the limited number of people currently eligible for Social Security and Medicare, imagine what will happen if these programs are expanded to include even more people…
For an idea, look at France where the average employee pays 45%. (and you thought your tax bracket was high!) But, if you think we need our government to take care of us, this may seem like a bargain.
Do you have any say in these taxes?
Only to the extent that you can vote for the politicians who you believe will guide these programs the way you would like to see them. And, many of them are advertising their plans and goals right now.
So, as always, do some research, gather knowledge, engage in enlightening conversations, and make your own decision.