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Three hopefully simple questions about social security and medicare payments that are being deducted from my paycheck - I haven't been able to find much information about this online.

  1. Are these payments that I make "reserved" for me when I retire? Or do they go into a giant social security bucket for everybody, out of which I am allotted a fixed retirement funds when I retire (irrespective of how much I put in).

  2. I make several donations to non-profits, and am able to claim a deduction on my federal and state taxes for this. But it looks like I can't claim deductions against social security and medicare?

  3. Why a separate payment bucket for social security and medicare? Why not just put it into the same federal tax we pay, thus simplifying the system? (I understand this is a more open question, but am just curious why it is structured this way.)

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    As a W-2 employee you can't deduct the half of SS/Medicare you "pay" (i.e. is withheld and paid in your name), but the half your employer pays is excluded from your W-2 wages and thus not taxed. If you are self-employed, you pay both halves (SECA instead of FICA) and you do get an income tax deduction for the half that would be the employer half.
    – dave_thompson_085
    Commented Feb 25, 2015 at 1:16

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  1. Reserved, sort of, but not dollar for dollar. Your SS benefits at retirement (usual case) will depend on your salary/contributions before retirement. These dollars contributed will have not have a direct effect.

    However, remember that SS is more than just retirement, it is also a disability "policy". You can get benefits (and your family get benefits) if you become disabled. And those benefits are not as closely tied to your salary and contributions.

    Think of SS and Medicare deductions as insurance premiums, not retirement savings.

  2. True, SS and Medicare are not deductible.

  3. Because, like a explained above, these are insurance premiums, not tax payments.

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  • I thought Social Security was determined based on 35 years of wages, not just for the few years before your retirement
    – Bishop
    Commented Feb 24, 2015 at 19:03
  • @Bishop Actually, it's the highest (indexed) 35 years of wages during your working lifetime. Check it out
    – Peter K.
    Commented Feb 24, 2015 at 20:39
  • So "for the few years just before retirement" is pretty misleading
    – Bishop
    Commented Feb 24, 2015 at 20:43
  • It can also (at least in my understanding) include earnings after 'retirement' (meaning the age at which you start collecting benefits. Say you work after 70, and earn more than the lowest indexed amount in that 35 years. Then the current year replaces the lowest year, and the benefit is recalculated.
    – jamesqf
    Commented Feb 24, 2015 at 21:12
  • Social Security really doesn't have a "fund". The money all goes into the Treasury in one pot of money.
    – Kristy Welsh
    Commented Feb 25, 2015 at 14:29

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