You have your salary, it is supposed to reflect your hours worked & bonuses achieved but the gross pay and net pay is different. Gross pay is the total amount you have earned. Net pay is what goes into your bank account or hand; the amount left after certain deductions have been taken out.
Your employer or yourself when you fill in your tax return, pay into income tax and Social Security. As you work you are earning credits that will entitle you to a certain pension, disability benefits and survivor benefits. The amount you pay to Social Security and Medicare is payable until you have reached retirement age or meet the criteria to receive a benefit. The amount you pay is matched by your employer. If you work for yourself you pay the whole amount, the employer and employee share.
On average most people need to work 10 years to qualify for the benefits. Your Social Security paychecks money is withheld by the federal law. The FICA (Federal Insurance Contributions Act) currently takes from your eligible wage; at the moment you can expect to be deducted 6.2% to Social Security benefits and 1.4% to Medicare. Whilst a considerable amount is being deducted it, unlike income tax, is going towards your retirement income, although the amount of benefit you receive depends on what your salary is and when you start paying Social Security. Your Social Security paychecks, the amount you pay to the government, can also have additional payments to cover for spouse, dependent children and survivors.
If you are looking to maximize the amount that will be available to you here are a few suggestions:
- Put in 35 years: if you don not work for at least 35 years zeros are added into the calculation formula and that will lower your payment.
- Raise you income; take a second job or ask for a raise, Social Security payments are evaluated off your salary.
- Claim when you reach your full retirement age 66 or 67 years of age, payments are reduced for early claims.
- If you wait to claim until you reach 70 years your full benefit will increase by 8% for every year you delay claiming.
- You can claim benefits on an ex-spouses work record if you were married at least 10 years. Your spouse can claim benefits from their own work record also up to 50% of the higher wage earner – whichever is higher.
- If both yourself and spouse reach retirement age and claim spousal benefits it would be possible to later change payments to their own work record which will then be higher due to delayed claim.
- Check your Social Security statement is correct, you can download this annually.
- You can make life a lot easier by receiving your Social Security payments by having them directly deposited into a bank or credit union, far easier for any survivor benefits as well.
Image credit: ssblog.bsgfdlaw.com/