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

FAA, Department of the Air Force Sign Commercial Space Agreement

News

Pearl River County man arrested in Arizona for allegedly trafficking methamphetamine

News

Sweet Mississippi Tea Festival returns to downtown Poplarville

News

PRCC offers annual Summer Bridge-to-College program

News

Greater Picayune Area Chamber of Commerce set to hold second Leadership Program, applications being accepted now

News

USDA announces cotton sign-up

News

Southern Miss student selected to management of Glimmerglass Festival

News

Today is June 21, 2021

News

CNN Names Commencement Speech at Mississippi’s Belhaven University Greatest of All Time

News

New mobile app enables USM nursing students to perform clinical tasks

News

Stay safe at rail crossings

News

A new art exhibit has opened up in Brookhaven, MS, and it’s all about the Blues

News

Mississippi Main Street announces 2021 award winners, Picayune Main Street Inc. brings home award

News

Attorney General Lynn Fitch announced a conviction and two sentencings in child exploitation cases in Warren, Rankin, and Hancock Counties.

News

LSU Manship School Professor Jinx Coleman Broussard Recognized Nationally for Long Record of Media History Excellence

News

Pennsylvania Man Arrested for Assault on Law Enforcement during Jan. 6 Capitol Breach

News

Today is June 20, 2021

News

Grand Island Husband And Wife Plead Guilty For Their Roles In Bank Robbery Committed By Their Son

News

Poultry Processing Plant Manager Pleads Guilty to Harboring Illegal Alien

News

Extension can test soil for carbon content

News

Former Jackson Public School Band Volunteer Pleads Guilty to Producing Child Pornography

News

PRC students have access to vaccine in upcoming events

News

Today is June 19, 2021

News

Lindsay Ward shares her goals with Exchange Club of Picayune