FINANCIAL PLANNING and WEALTH BUILDING FOR THOSE IN THEIR 30s AND 40s

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Page 3 of ‘Your Social Security Statement’

By CHM on Nov 29, 2007 in Social Security

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Please click on the thumbnail to the left to see a sample of Page 3 of Your Social Security Statement. The numbers highlighted in red are explained, and expanded upon, in the post below.

In this section you see Wanda’s earnings record. She has been working and paying social security taxes since 1982. You can also see that her 2006 numbers have not been recorded; sometimes this statement goes out before the SSA has had a chance to update it.

You can see a separate column for your taxed social security earnings and your taxed Medicare earnings. Social Security hits you for a 6.2% tax and Medicare hits you for another 1.45%.

This section just reiterates some of the key points regarding social security. I think some people are under the impression that Social Security is something you only receive when you’ve reached old age. In fact, a young person or their family may be entitled to benefits if they qualify.

In Wanda’s case if you refer back to page 2 you will see she is entitled to $1,293 a month if she was disabled right now.

In Wanda’s case it seems she has never been self-employed. Her employers have paid the same amount in social security taxes as she has. Both have paid over $27,700 in SS taxes and $6,500 in Medicare taxes. If you were to add up each year of Wanda’s earnings and multiply it by 6.2% (for SS) and 1.45% (for Medicare), you’d get the total taxes reported in this section.

This section just reiterates the percentage of your salary that is taxed by social security and Medicare. In 2005 Wanda was taxed 6.2% on $38,626. If she were to make $135,000 in 2007 only $97,500 of this is taxable at 6.2% for social security; there’s no such earnings cap on the Medicare portion.

For 2007, $97,500 was the maximum amount of earnings on which you had to pay Social Security taxes.

If you do spot an earnings discrepancy in section #15 be sure to report it to the SSA which can be reached at the listed phone number. The amount from which your social security taxes are assessed should correspond to your W-2.