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Tuesday, February 22, 2011

Social Security and You (Part 1)

Back in the 80's, I was a public high school teacher for a couple of years. Therefore, I find the current events in Madison WI interesting. There are a multitude of data issues behind the protests and press conferences and I've learned things about teacher pensions that I wasn't aware of.

I considered writing about teacher pensions, but decided against it because 1) most who read this post aren't teachers, and 2) things could quickly deteriorate into a non-data political discourse.

Then I saw this comic in today's paper and decided that it was a good time to bring up Social Security. While it has its own political discourse risks, I'm willing to take that chance.

The primary target audience for this entire blog is college students but this post is especially for them.

How much do you know about Social Security taxes? If you have a job, you should look at your last pay stub. There are probably a couple of lines, one for "Social Security" and another for "Medicare" (maybe something's labeled OADSI). Many people discuss Social Security and Medicare as if they are one thing, but they're technically different programs. How much does that matter from a data perspective?

Regardless of whether or not you group them together, do you know what percent of your income they take for these taxes? Are you aware of how much your employer pays in addition to your payment? When you do your tax returns (or someone does them for you) do have any idea how income tax deductions and credits do or don't relate to Social Security/Medicare taxes?

I'm not going to answer any of these questions here. If you don't know the answers I urge you to look them up. I also strongly suggest that after you do your taxes you sit down and figure out exactly how much federal income tax, state income tax, and Social Security/Medicare tax you paid as a percent of your income. You may hear a lot about marginal tax rates but you should know what percentages you actually pay. You may be surprised, pleasantly or otherwise, at your actual percentages and how those three categories (fed, state, Soc Sec) compare.

Once you've figured out what percent you pay, do you know what you're supposed to get in return? Do you know what you're actually going to get? Is that really two different questions?

I hope that I've whet your appetite enough to seek some answers. After you find those answers you can let me know if it was worth the effort.

More to come...

1 comment:

  1. I have always paid a large amount of taxes it seems, because I work full-time. So, I looked at my most-recent paystub to get exact numbers for these questions.

    Social Security Tax- $57.62 - 5.0% of my net income. Medicare Tax- $16.02- 1.4% of my net income. These numbers actually seem small to me, until I calculated the actual government deductions from my paycheck... 23.2%. This amount seems ridiculous because I am seeing no immediate benefit of these tax deductions.

    Since I no longer live at home, and pay all my own school/living expenses I was able to file my taxes as an independent. I actually got over $3,000 back thankfully. If I had allowed my parents to claim me (if I hadn't moved away from home), I would have owed the government another $36.

    I feel like social security is a problem that needs to be fixed immediately, because it seems like a situation that is only getting worse and worse, as we pay more and more.