Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.

By Topics

MONTHLY ARCHIVE

Mar 2010 (7)
Feb 2010 (2)
Jan 2010 (7)
Dec 2009 (3)
Feb 2009 (4)
Jan 2009 (8)
Dec 2008 (1)
Jun 2008 (2)
May 2008 (2)
Apr 2008 (5)
Feb 2008 (3)
Jan 2008 (15)
Dec 2007 (32)
Nov 2007 (6)
Oct 2007 (8)
Sep 2007 (9)
Aug 2007 (24)
Jul 2007 (2)
Jun 2007 (1)
May 2007 (3)
Apr 2007 (4)
Mar 2007 (4)
Feb 2007 (13)
Jan 2007 (6)
Dec 2006 (3)
Nov 2006 (7)
Oct 2006 (7)
Sep 2006 (6)
Aug 2006 (4)
Jul 2006 (10)
Jun 2006 (1)
May 2006 (3)
Apr 2006 (2)
Mar 2006 (6)
Feb 2006 (6)
Jan 2006 (3)
Dec 2005 (1)
Nov 2005 (9)
Oct 2005 (8)
Sep 2005 (13)
Aug 2005 (25)
Jul 2005 (16)
Jun 2005 (17)
May 2005 (19)
Apr 2005 (20)
Mar 2005 (24)
Feb 2005 (23)
Jan 2005 (36)
Dec 2004 (40)
Nov 2004 (34)
Oct 2004 (17)
Sep 2004 (21)
Aug 2004 (59)
Jul 2004 (37)
Jun 2004 (31)
May 2004 (29)
Apr 2004 (52)
Mar 2004 (49)
Feb 2004 (49)
Jan 2004 (31)
Dec 2003 (48)
Nov 2003 (52)
Oct 2003 (29)
Sep 2003 (8)
Aug 2003 (5)
Jul 2003 (2)
Jun 2003 (2)
May 2003 (5)
Apr 2003 (2)
Mar 2003 (2)
Feb 2003 (3)
Jan 2003 (29)

No More Social Security Tax Payment in 2006!

Contributed by mm | July 27, 2006 10:02 AM PST

I was checking my paystub for July and just realized that my social security tax payment for the month declined substantially from previous months' levels. Year to date, I have contributed $5,840.40 to the social security program, or the annual maximum ($94,200 income taxed at 6.2% rate). This means starting in August, my monthly take-home pay from my day job will be $900 higher than what I got each month in the first half of 2006.

Does it mean I am one step closer to achieve my annual net worth goal?

This Post Has Received 9 Comments. Share Your Opinions Too.

Cody McKibben Commented on July 28, 2006

How did you get your Social Security contributions to go down? As a young professional, I live in constant fear that I am contributing money to a retirement pension that I will never see again. Are there legal ways to avoid this?

CPA1298 Commented on July 29, 2006

Cody - Social Security tax is only imposed on the first $94,200 of earned income. MM has already reached that income level at this point in the year (wow!); for the rest of the year he will only be paying the Medicare tax of 1.45% on his income. This is why the Social Security tax is a 'regressive' tax; unlike nearly every other income-based tax, it hits those at lower income tax brackets harder. That is, for many low-income individuals, this is the only income tax they pay.

I'm not at all saying this is wrong, but it is an interesting divergence from the rest of the income-tax structure.

Anonymous Commented on July 29, 2006

Do you realize you are giving away your income information (or at least a lower bound)?

fatboy Commented on July 29, 2006

Anonymous, loyal readers of PFBlog will have already known MM makes six figures.

Cody McKibben Commented on July 30, 2006

Thanks for the info CPA! Interesting.

Anyone know if there ARE legal ways to get out of paying Social Security though? Since you are supposedly just paying to a state pension fund for yourself, I would much rather put it into my own more aggressive 401(k) or a Roth IRA. I've heard of companies that somehow legally get you out of SS payments... I know it sounds shady, but I was just curious if it's really possible.

20BigOnes Commented on August 1, 2006

Cody,

When you have money taken out for Social Security, you are not paying to a state pension fund for yourself. It is going to a federal fund for current retirees -- not a personal fund for yourself. You are relying on future generations to cover your Social Security income in retirement.

Geoff B Commented on August 4, 2006

And therein lies the problem. I'm sure many of us would like to do our own investing.. perhaps Mr Buffett should manage the federal fund.

Robert Commented on August 31, 2006

Do you know how if you take a new position mid-year the new company will know to stop your FICA payments after income from the first + new company hits the 94200 mark? Thanks...

Darien Ramon Commented on December 31, 2006

Capcom Plans to Release Six Xbox 360 Games in 2007..