Q & A
Ask Rusty – Does Paying Social Security Payroll Tax Increase my Benefit?
Dear Rusty: After losing my job of 31 years in 2013 at 63 years of age, I decided to start drawing my Social Security benefits. In 2015 I started a part time job, which I still have. In January 2020 I will fully retire. I have been paying Social Security taxes for the last 4 years without receiving any increase in my Social Security benefit amount. Can I therefore claim an increase in benefits, or even a refund of those taxes? If not, is there anything that I can do? Signed: Overtaxed Senior
Dear Overtaxed Senior: I’m afraid it doesn’t work that way, nor is there anything you can do to get either an increase in your benefit amount from (or a refund of) those FICA payroll tax contributions you made to Social Security while you were working and also collecting Social Security benefits. Everyone who works and earns – even those who are collecting Social Security benefits – must pay the Social Security FICA payroll tax. But paying that payroll tax doesn’t entitle you to a benefit increase. The FICA tax you pay doesn’t get credited to a personal account for you; rather it goes into the Social Security general fund to help pay benefits to all current beneficiaries.
Social Security’s basic premise since inception in 1935 is that current workers pay for current beneficiaries. Today, there are about 175 million workers contributing to pay benefits to over 63 million beneficiaries. And actually, the ratio of workers to beneficiaries has been declining for years, which is largely responsible for Social Security’s current financial issues. For example, in 1950 there were about 16.5 workers for each Social Security beneficiary; today there are about 2.4 workers per beneficiary.
As I said, everyone who works and earns must pay the Social Security FICA tax, but the FICA taxes you pay do not increase your benefit and there is no refund of FICA taxes for those already collecting Social Security benefits. Once you claimed your Social Security benefit, the amount was set and will only change as a result of COLA (cost of living adjustment) increases, or if any of your current/recent earnings are more than any of the inflation-adjusted earnings in the 35 year lifetime work record used to originally compute your benefit. Social Security uses the highest earning 35 years in your lifetime work history (adjusted for inflation) to compute your benefit, and if you don’t have earnings in at least 35 years they put in zeros to make a full 35 years. In that case, any current earnings you have would replace any zero earning years in your 35-year history which would slightly increase your benefit. But except for those circumstances, your benefit won’t change simply because you are paying Social Security FICA payroll taxes while you are working.
Think of it this way: The Social Security benefits you are now receiving are being paid for by those Americans currently working, and that will continue even after you retire completely in January. And, you’ll continue to get those Social Security benefits for the rest of your life, from the payroll taxes paid by those still working. .
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at firstname.lastname@example.org.