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An exception
may exist if you are a temporary worker transferred by your international
company from a country that has a reciprocal treaty with the U.S.
For details, see Treaties
Avoiding Dual Social Security Taxation.
What Is Social Security?
Social security
is the broad term for the range of financial benefits available
to virtually all workers in America from the U.S. Federal Government.
Most workers in American rely upon Social Security benefits at some
time in their lives. It may be when they retire and collect retirement
benefits; it may be during their working lives if they become disabled
and are unable to work; or they may be eligible for survivors benefits
upon the death of a worker.
Social Security
is administered by the Social Security Administration (SSA). The
three main programs that they administer are:
- Social Security
Survivors Benefits
- Social Security
Disability Benefits
- Social Security
Retirement Benefits
These three
programs are all funded by payroll tax deductions--that means by
every worker in America. (See The
Social Security Programs).
Once you are in the system, you begin accumulating credits towards
future benefits. Once you are eligible for benefits, you may apply
to the Social Security Administration to receive them.
You may hear
someone say, "I'm on disability." That generally means that they
are a disabled worker who is collecting Social Security disability
benefits. Or you may hear the phrase, "I'm on Social Security."
That person is probably a retiree and collecting Social Security
retirement benefits.
If you are
a non-U.S. citizen, in order to become part of the Social Security
system, you must have lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S., and a Social
Security number. (See How
Do I Apply for a Social Security Number?)
There is a
SSA office in almost every city or county in the U.S. You may find
your nearest office using the online Social
Security Office Locator, or by calling SSA's national toll-free
number: 1-800-772-1213. For common questions, see the FAQs
on Social Security.
How
Much Am I Taxed?
Social Security
taxes, also known as FICA (Federal Insurance Contribution
Act) are usually withheld from your salary. As an employee, you
are taxed 7.65%, which covers both Social Security and Medicare
(the government health insurance program providing coverage to people
age 65 and over).
The Social Security
part of the tax is 6.20% of gross wages (wages before any deductions)
up to $76,200. The Medicare tax is 1.45% of all earnings.
Your employer
is required to contribute an additional 7.65% to match your contribution.
If you are self-employed, you pay Social Security taxes equal to
the combined employee/employer tax (15.3%), which you must remit
to the Internal Revenue Service (IRS) on a regular basis (although
half of this tax is deductible as a business cost).
How
Is the Money Used?
Generally, out
of every dollar paid in Social Security and Medicare taxes: 69 cents
goes to a trust fund that pays retirement and survivors benefits;
19 cents goes to a trust fund that pays Medicare benefits; 12 cents
goes to a trust fund that pays disability benefits. Your Social
Security taxes also pay for administering Social Security. The administrative
costs are paid from Social Security trust funds and are less than
1 cent of every Social Security tax dollar collected.
The Social Security
trust funds now take in more money than they pay out each month--about
$5 billion more per month. These reserve funds are then invested
in U.S. Treasury bonds, the safest of all possible investments.
Those reserves will accumulate, earn interest, and be used to help
pay for the retirement of the baby boom generation beginning around
2010.
Note:
- Some local
and state governments have their own retirement and disability
plans and do not belong to the Social Security system. Employees
of these governments are not in the federal Social Security system.
- While most
SSA programs are funded from payroll taxes, the SSA does administer
a program using general tax funds, called Supplemental Security
Insurance (SSI). SSI disability benefits are paid to people who
have a disability and who have very few assets and little means
of support.
The
information provided in this website is not legal advice and should
not be interpreted as legal advice. This website is intended to
provide a basic understanding of this information in summary form.
This information may not be comprehensive, is subject to change,
and may not apply to all individual circumstances. Any information
received here should be confirmed with the appropriate government
agencies or with an attorney, particularly as it relates to your
individual circumstances. Your use of this website indicates your
agreement to be bound by our Terms
of Use.
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