Taxes

Is Someone You Know Wondering “Who” FICA Is?

August 22, 2016 • By

Last Updated: August 4, 2021

Businessman Filling ChequeSocial Security’s Acting Commissioner, Carolyn W. Colvin, likes to tell this amusing story. A colleague’s teenage daughter came home bursting with excitement after receiving her first paycheck. But she had one question about her earnings statement.

“Well, Dad” — she asked him earnestly — “who is this FICA?”

If you’re a seasoned worker, you probably know that this is a federal tax on wages. Two taxes, really. FICA stands for “Federal Insurance Contributions Act.” This is the law that funds both Social Security and Medicare through payroll taxes. Employees share this cost with their employer.

Your FICA contributions earn Social Security credits. For 2016, you need to make $1,260 in wages to earn one credit. You can earn up to four credits a year. Most of today’s workers need at least 40 credits to apply for retirement benefits. That’s ten years of work. Of course, you have to be old enough to retire too!

Social Security also pays benefits to workers who become severely disabled, and to survivors when a worker dies. The number of credits you need to qualify for these benefits depends on your age when you become disabled or die.

You can get Social Security retirement benefits as early as age 62. If you retire before your full retirement age, your benefit will be smaller. Your benefit will be highest if you put off retirement until you’re 70. We base your retirement benefit on your average earnings over your working years.

Visit our benefits planner to find out more.

Your FICA contributions also pay for Medicare hospital insurance. Medicare is the country’s health insurance program for people age 65 or older. People younger than 65 with certain disabilities or permanent kidney failure can also qualify for Medicare. You’ll find everything you want to know about Medicare at Medicare.gov.

If FICA were a person, she’d have plenty to juggle! Social Security covers an estimated 165 million workers. The program pays benefits to about 40 million retired workers, 9 million workers with disabilities, and 6 million survivors of workers who have died. It also helps about 5 million dependent family members.

The equivalent law for self-employed workers is the “Self-Employment Contributions Act,” or SECA. If you’re self-employed, you pay both worker and employer contributions toward Social Security and Medicare. The employer share counts as a deductible business expense.

We make it easy to get estimates of your future retirement, survivors, and disability benefits. By creating a personal my Social Security account, workers have 24-hour access to their personalized Social Security Statement. Besides showing your future benefits, the Statement lets you check to be sure the earnings information we have for you is correct.

Create your account to take advantage of this invaluable financial planning tool. It’s free, fast, and secure! If there’s someone in your life who may be wondering who FICA is, let them know too.


Tags: , , , , , , ,

See Comments

About the Author

J. Jioni Palmer, Associate Commissioner, External Affairs

Comments

  1. Roy S.

    What about those whom are collecting SS or SSI that are not fully justified.

    • Carter

      That don’t even make sense and really you have no clue what your ragging on. Also please don;t response you may appear more than just dumb!

      *It was design to care and do just that!” so what’s your grief about that …it was design for that purpose, Why some people have a problem with that is beyond my comprehension

      • K

        Carter, I would suggest that re-read your own post. Talk about looking dumb, your use of the English language left something to be desired. Your spelling and correct tense of words might possibly show how dumb you are.

  2. David

    I became disabled at age 52 what happens when I turn 62 am I getting my ss now thanks

    • retiree

      SSDI turns into regular social security when your 62 yrs.or 66for fullretirement age based on when you were born .

      • David

        Thank you

      • Ray F.

        Disability benefits under the Social Security Disability Insurance (SSDI) program, will automatically convert to retirement benefits, when beneficiaries attain their full retirement age (currently age 66). The benefit amount will generally remain the same.

    • Ray F.

      Hi David. When you receive disability benefits under the Social Security Disability Insurance (SSDI) program, we will automatically convert your disability benefits to retirement benefits, when you attain your Full Retirement Age (currently age 66). The benefit amount will generally remain the same.

  3. Maria

    Does anybody knows what exact period the SS take for the calculation of your retirement income? the last 10, 15, 20 years of work?
    Thank you!

    • Lou

      I believe that they use the highest 35 years or earnings to base you’re SS benefits

    • Ray F.

      Hi Maria. For retirement benefits, we use the individual’s highest 35 years of earnings to compute monthly benefit amount. The best way to start planning for your future is by creating a my Social Security account online. With my Social Security, you can verify your earnings, get your Social Security Statement, and much more. Also, we have a variety of benefit-calculators to help you plan for the future. Hope this helps!

  4. Lee

    Thank you for writing out the facts of the situation Tom. I appreciate it.

  5. Mikifinn

    Working in accounting I knew who FICA was. and why business want Social Security gone from paychecks. Since they business has to match this payment for each and every employee who work for them. The retirees benefit from their deductions but also from the matching payment from the business who also contribute.

    • JCHODELL

      IF THIS IS A FINANCIAL ACCOUNTING EXPERT, MAYBE HE/SHE SHOULD HAVE TAKEN A FEW ENGLISH CLASSES. HOPE HE/SHE NEVER WRITES MY SOCIAL SECURITY CHECK!

  6. Tom

    Social Security is an insurance program. It says so right at the top of your application. It is to insure against a percentage of lost working income whether that be due to retirement, death or disability (as defined by Congress and the courts). When you have insurance you pay into the pot not knowing if you (or a loved one) will ever collect. This is a program, like all insurance programs, where funds are pooled for eventualities. That is the nature of all insurance. It is not an annuity with a private investment account that you can take a lump sum from. There is strength in pooling that cannot be obtained by self investment. Most people who do qualify use up their contributions with interest…it doesn’t stop when these run out. There have to be tradeoffs, including some who invest for the greater good even if it works out that they don’t personally get much out of it. Let us remember that our national motto “e pluribus unum” means “out of many one”. That ability to see beyond ourselves used to represent the better angels in America. This doesn’t mean that the program is crooked. If you want more, you will have to pay more or find other financing. If you want changes, Congress will have to legislate them. No President has outright control over the programs either. The agency can only act on rules and regulations derived from Congress. These are facts. Unrelated unhappiness with politicians or parties, or political axes to grind just muddy the water and create confusion about what the program actually represents. There are no conspiracies involved. It is what the people you sent to Congress legislated.

    • John O.

      Could not have said it better.

    • William M.

      So tell me why is there the GPO/WEP. I worked 9 nine years before I became a civil servent. If you don’t know that’s where they steal $ 428.00 per month. Please explain.

      • Anonymous C.

        To ensure that most Social Security beneficiaries receive enough income on which to live, Social Security benefit formulas are weighted to be most favorable to those that worked all their lives at relatively low wages. As you earn more, the benefit amount you will later receive does increase, but such increases begin to accrue more gradually.

        While the above computational formula was designed to help those with low wages, it unfortunately created an unintended windfall for those that worked most of their lives at government jobs that did not participate or pay into Social Security. The effect was that government employees often essentially minimized their contributions to the Social Security system, yet when they did later qualify for Social Security, they often received the highest rates of return possible on those dollars they had paid in.

        It was during the Reagan administration that the above unfairness was addressed. Today if you receive a pension based on employment that didn’t pay into Social Security (and you don’t have 30 “substantial years” of paying into Social Security), the favorable computational formula for low wage earners is modified and your benefit rate is reduced by what SSA calls the Windfall Elimination Provision (WEP). Also, if try to collect Social Security as the spouse or widow of a worker that paid into Social Security, your years of employment where you did not contribute to the Social Security system do not go unnoticed and SSA reduces your benefit by 2/3 the amount of your “non-covered” pension. This reduction to a spousal or widow’s benefit is called “Government Pension Offset” (GPO).

      • Kenny O.

        Hello William, Thank you for your question. Individuals that worked for a federal, state or local government agency, a nonprofit organization or in another country, are sometimes eligible for a pension based on earnings not covered by Social Security.
        If this is your situation, your future Social Security benefit amount could be affected.
        However, If you paid Social Security tax on 30 years of substantial earnings you will not affected by the Windfall Elimination Provision (WEP). See more information: Information For Government Employees

    • Lou

      Be careful as to how much stock is put into the titles of government run programs, after all is the Affordable
      Care Act actually affordable? Insurance companies have been pulling out. Time will tell. Social Security can be considered a ponzee scheme which works as long as a lot more people are putting in as compared to those taking out. When initiated it was a sixteen to one ratio. I’ve heard that it is now closer to six to one. Thoughts?

    • Carter

      Yes it is insurance…however the US people are its backers of that insurance it is not based on a means of profit but only of sustaining the nations elders, widows, and orphans.When your retired its time to enjoy life SS is to provide a basic income to the having a dignified life as I understand its based. Understanding that is or our solidarity as one!

    • MK

      Great job explaining that. People just keep complaining before they understand what SSA is all about. I am sorry though your daughter passed away.

  7. William T.

    My daughter passed away at 31 years of age. She had tens of thousands of dollars in her account. She never filed a claim on her account. Yet, Social Security stole her premium dollars from her annuity- Yes ANNUITY not entitlement.. No reimbursement for unused premiums. No death benefit. The system is in bigger trouble then we all thought when you steal money from the working class people and let the elite pay nothing. Take the cap off of the FICA taxes and here’s what you do: Make everyone on Social Security/Medicare categorically duel eligible for Medicare and Medicaid; Death benefit of unused premiums; Develop parts for Dental, glasses and long term care; no exemption for FICA, everyone pays;. et al. It can be fixed only if we the people get angry enough.

    • Diana

      Can you tell us more about this .
      Thank you.

    • John O.

      Sorry that your daughter passed away at such an early age. Some misconceptions need corrected, however. If she had worked and paid in the max for 10 years there is no way her contribution would have amounted to tens of thousands. Evidently she was not married so no $255.00 death benefit. And if she had no children then no survivor’s benefits either. It was her life choices that resulted in no payouts from her account. No one stole anything. She had no annuity, she had insurance and like with any insurance there are those who collect and those who don’t, it’s called sharing the risk.

      And why should those on MEDICARE also be on MEDICAID or welfare? Those getting MEDICARE for the most part are there as an earned right, welfare is not earned. Remember the more that pay into FICA the more that can potentially collect ending up in a zero net gain or loss in the long haul.

      • Aloha G.

        John, so well said. I hope that you are in a position to continually educate people on this topic.

    • Carter

      how could we get agree we are to busy looking at Fox sports or Fox News that’s to busy to send and email to your Congressman or Elected official and vote other than just the Presidential elections…We have FICA and social Security was implemented to prevent dire and dog poor poverty… Check history to see how the elderly who retired before there was a SS and a FICA Now helps the elderly as well as the short of mind. “Don’t they need to have a life? Our collective and solidarity is what created these programs. Which in the last 20 – or so years has changed to and anti-solidarity mindset and movement. They say we can get more bang for the “buck if we privatize it…Marlarkey these folks are against improving our people in all community. All they talk about is the $money “yet they have failed to pay the Loans back to Social Security, during the Johnson, Lyndon
      As well as the Reagan administration, I have yet to hear that money has been paid back into the SS account.

      • Ray F.

        Carter, Social Security is a pay-as-you-go system. Social Security taxes collected from today’s workers pay the benefits of today’s retirees. Any funds in excess of what is needed to pay today’s benefits are invested in special issue, U.S. Government, interest-bearing securities. This investment – the purchase of U.S. Government securities – is what constitutes the “borrowing” that people are sometimes concerned about. Any funds that have been “borrowed” from the Social Security Trust Funds have always been paid back in full, plus interest. Please check out our Trust Fund Frequently Asked Questions page for more information.

    • Fred S.

      I am with you , but our gov. will never do it.

    • Alan

      Hello! You need to read the Supreme Court’s 1960 case of Flemming vs. Nestor, in which the Court declared there is NO “special” saving’s type account for each enrolled worker.

  8. Joe W.

    Strange ,they in the government,always complain about SS Benifits.
    Well, for an individual, like me ,who worked 50 yrs.WITHOUT any state of Federal help. Had my FICA paid up by July every year. The government should thank us,who worked ans employed people .
    Then, I would like to hear Clinton,or Obama about the garbage package they offer.
    Wise up America! Soon it will be to late. Another 4 yrs. like the present admin.will bankrupt the country.

  9. Jim K.

    If congress would just pass the FAIR TAX bill, we wouldn’t have FICA taking money out of our pay check.

    • John O.

      Really? No Social Security anymore, eh?

      • Bill

        No, Social Security still there, it is covered by the Fair Tax. Look it up, you might like it.

        • ron

          How about doing away with the Windfall Elimination Act, which steals half of my SS annuity each month. There are two bills in the “do nothing” congress to repeal it. Then we can talk about tweeking the system.

  10. Karen

    “Who is FICA and why did he take all my money?”

    Rachel Green after receiving her first paycheck on “Friends.”

    • s

      my first thought too!

    • ED

      I also think they had Penny ask this on Big Bang Theory years later.
      Ed Waterbury CT

Comments are closed.