Social Security Basic Facts You Can Use Social Security Basic Facts You Can Use, Keywords - FICA, Federal Insurance Contributions Act, Social Security taxes, Medicare, retirement, Survivor Benefits, Government, Education For anyone who's ever squinted at the little box marked FICA on their paycheck stub and wondered, "FICA, what's a FICA?" this is your lucky day. It's really not much of a mystery. FICA stands for Federal Insurance Contributions Act, the law allowing Social Security taxes, including Medicare, to be deducted from your paycheck. The amount in the box is your contribution during that particular pay period. So where does the money go? When you think of Social Security, you usually think of retirement. And while it's true that a large portion of your Social Security tax dollar is used for retirement benefits, it also pays for other benefits which are just as important. A new publication from the Social Security Administration, Basic Facts About Social Security, explains the different benefits paid by Social Security, how many people receive them, and who's eligible. It also shows you how to get more information on specific Social Security programs. Social Security takes in a lot of money, and pays out a lot of benefits. Currently, more is being collected than spent. The extra is set aside in trust funds, earning interest so Social Security will be ready for the Baby Boomers and beyond. For the money that is spent, here's how each dollar of your FICA taxes is used: 69 Cents to Retirement and Survivor Benefits Almost all Americans pay Social Security taxes during their working years. And everyone who does is entitled to benefits when they retire. Generally, the more you've earned, the more you've paid in, so the more you get back in your monthly benefit check (see box). Right now you can retire with full benefits at age 65. Or, if you choose, you can accept reduced benefits and retire as early as age 62. Social Security also pays survivor benefits to the eligible family members of a deceased worker. Monthly payments to a widow(er) with two children averages $1,350. Eligibility for these benefits depends on the age and ability of the surviving spouse and/or children. 19 Cents to Medicare Benefits Medicare assists those over 65, and people with certain disabilities, in meeting medical expenses. If you receive Social Security benefits, you're eligible for Medicare, although some coverage requires additional monthly premiums. 12 Cents to Disability Benefits When a physical or mental disability prevents someone from functioning in his or her job, Social Security steps in. To collect disability benefits, the condition preventing work must be expected to last at least 12 months or result in death. Monthly benefits, averaging $1,100 for a disabled worker with a spouse and two or more children, are paid until work can be resumed. An important note: Less than 1% of each Social Security tax dollar is spent on administrative costs. The other 99% is paid back in benefits or set aside for future use. For an idea of how much you'll receive in Social Security benefits, request a free Personal Earnings and Benefit Estimate Statement. A Common Misconception About Social Security Social Security was never intended to provide full financial support for retirement; it's there to supplement your pension, savings, and investments. A comfortable retirement requires an income of about 70% of what you made while working. How much will you get from Social Security? It depends. Low wage earners receive approximately 60% of pre-retirement income. Average wage earners about 42%, and high wage earners 26%. Social Security certainly plays a major role in retirement planning, but the rest is up to you.

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