Being employed in America, you must be aware of the Social Security and Medicare taxes that are deducted from your paycheck every month. This is something that you would also notice when you receive your salary slips and look at the breakups that the company help you with. These are known to be termed as Federal Insurance Contribution Act Tax (FICA) where a certain sum of money is collected from the employee as well as the employer in equal parts.
Just as the federal and state taxes that are deducted from your end, the FICA is something that is something that is deducted routinely from the employees. While not may know where these taxes go after deduction, there is the need for you to know about it when you are a part of the American Economy.
Here are a few questions answered on the Federal Insurance Contribution Tax where you get to know about the purpose of its existence, where it goes to and how one gets benefitted in the long run.
Where do the Social Security Taxes Go?
Most of the FICA taxes collected from the employees and employers are known to be redirected to the social security trusts owned by the government. These are trusts that are delegated the job to fund the programs undertaken by the social security administration where it covers retirement benefits, disability benefits and survivor benefits for people.
These funds are collected from people with jobs and accumulated to a single trust which is known to fund those who are retirees and their partners who have been qualified for retirement benefits. It is also known to help surviving partners and children of employees who have died due to any given reason and is also something that helps disabled employees from receiving disability benefits to fulfil their daily needs.
Where do the Medicare Taxes go?
A portion of these taxes goes for the Medicare where senior citizens of the country are known to receive medical aid and assistance as and when required. These services are funded by the government s well while having contributions from employees, employers and the government altogether. For those who are Medicare beneficiaries, they are known to receive hospital and medical expenses free of cost while helping them recover in a smooth and cashless manner.
What is the funding process of the FICA?
It is said that all employees and employers country-wide are known to contribute equal portions for the FICA tax that is often deducted from the salary and payment structure every month. This is where the FICA is funded from. While a certain sum of money is earned from the assets owned by the Social Security Trust Fund and the taxes from the Social Security benefit, it turns out to be a grand accumulation.
Will the FICA help out with financial backup post-retirement?
In short, the FICA will not help you cover all your monthly expenses and will to a certain extent do so. It is expected only to cover 40% and the rest 60 % is to be arranged for by the person who is retired. While most people tend to rely on that money, it gets disappointing when people do not receive the money. This is something that people should be aware of as not always can FICA help post-retirement and one have to make their arrangements to survive.
What is the eligibility age for these benefits?
While the benefits of FICA can be availed on when you retire and are of 65 years of age. There are times when people opt to enjoy the benefits when they are 62, but things are partial then. At this age, you get to receive lesser benefits that would last till you die. If you opt for the benefits once you have passed 65 years, you will receive 100% of it until the time you are alive. Some people delay the benefits for another 5 years until they are 70 where an interest of 8% adds up every year and there are better benefits that come along.
What is the amount that gets deducted towards FICA?
In the present times, employees are known to part with 6.2% of their salary and the employers to part with the same amount that goes towards funding the FICA. While it is less for those who are employees and employers but when it comes to those who are self-employed, things get to be different from them. They have to pay double the amount that comes to 12.4% which goes towards the funds to receive benefits from it in the days to come.
The process of FICA benefits for the partner
When a partner of the receiver dies due to any circumstances, the other partner is eligible to receive the FICA benefits once they have reached the retirement age. There are times when the spouse to is eligible for the social security benefits, and if there is a case where they receive higher amounts than that of the deceased spouse, the higher benefits will remain. It applies to a certain extent when divorced where you are to be married at least for 10 years and divorced for 2 years where you can receive half of their benefits once you pass your retirement age.
What is the process of application of the benefits?
When it comes to receiving the benefits coming from FICA, it is something that doesn’t always need physical application. Making an application online too can make you receive the benefits once you have crossed your retirement age. Producing your birth certificate as well as a copy of the W2 forms and any other document depending on the application procedure would be sufficient. There are times when you can make telephonic applications with the social security administration office, and things get done.
While all of these questions and answers solve all your queries, it is something you can refer to whenever you have a problem while paying for the FICA and its associated taxes.