Ad Spot

Ask Rusty – Does Paying FICA Tax Now Increase My Benefit?

Dear Rusty: If a person retires at age sixty-six and continues to work full time, Social Security taxes are still taken out of his weekly paycheck. Will this taxation for Social Security contribute more to the person’s Social Security benefit, even if already retired? Signed: Curious Retiree

Dear Curious Retiree: Since its inception in 1935, Social Security has been a “pay as you go” program where contributions from those who are working are used to pay benefits to those who are collecting Social Security benefits. That remains true even if, after you start collecting Social Security, you work and pay payroll taxes into the system.

Those Social Security (SS) payroll taxes you are contributing now aren’t deposited into a personal account for you, they’re used to help pay benefits to all recipients. So, paying SS FICA payroll taxes after you start collecting benefits doesn’t affect your benefit payment. However, what might affect your benefit amount is if your current earnings from working are more than any of those in the 35 years used to originally compute your Social Security benefit when you filed.

When you apply for SS benefits, Social Security adjusts every year in your lifetime earnings record for inflation to bring those earlier earnings up to today’s dollar values. They then select the 35 highest-earning years over your entire lifetime, and from those 35 highest-earning years they develop your “Average Indexed Monthly Earnings” (AIME). Your AIME, in turn, is used to compute your Social Security benefit at your full retirement age (FRA).

Social Security examines your earnings every year after your earnings for the previous year are reported to Social Security by the IRS.

After your benefits have started, and if your current earnings are higher, Social Security will replace an earlier year’s earnings with your more recent earnings and recompute your benefit, resulting in a small benefit increase (“small” because it would represent only 1/35th of the average lifetime earnings used to compute your benefit).

A key thing to remember is that each of your past year’s earnings (up until you are 60) are adjusted for inflation before computing your benefit amount.

So, for example, $25,000 earned in 1990 is worth more than $60,000 in today’s dollars, and it is the inflation-adjusted amount that your current earnings would need to exceed increase in your benefit.

I recently published an article on this topic which you may find helpful: www.socialsecurityreport.org/ask-rusty-does-paying-social-security-payroll-tax-increase-my-benefit/.

News

Today is April 16, 2021

News

Narcotics investigators arrests several in separate cases

News

WIC food distribution sites closing soon 

News

Gone but never forgotten – DSC Dredge celebrates the life of James Edward Cicardo, aka “Eddie”

News

Biloxi PD looking for missing person

News

Troopers work fatal accident on I-59 involving Louisiana man

News

Today is April 15, 2021

News

Proposed golf cart ordinance meant to be a lagniappe for Poplarville residents

News

Poplarville’s ladder truck is back in action

News

Pearl River Central Water Association issues precautionary boil water notice for Rock Ranch Rd.

News

Plan well before starting a backyard chicken flock

News

Jackson Man Pleads Guilty to Armed Robbery of Jackson Ice Company Gas Station

News

Today is April 13, 2021

Education

Andrea Reed, Nissan of Picayune Teacher of the Week

News

FCC encourages public to use its speed test app to measure their broadband speeds

Education

Poplarville School District creates new positions to support virtual learning

News

Body pulled from Mississippi River in Reserve

Art & Entertainment

Poplarville native recognized for her songwriting

News

Biloxi PD asking for help to identify man who stole chainsaw, left in vehicle with Pearl River County tag

News

Sheriff’s Department purchases new radios and 8 new vehicles

News

High Water Forces Closure on Bogue Chitto National Wildlife Refuge; steps taken to protect wildlife and visitors,

News

Motorcyclist Killed in Crash on LA 1091

News

Today is April 13, 2021

Breaking News

Arrest made in deadly shooting, victim identified