Social Security Tax FED OASDI Increases in 2014

First the good news.  The government recently announced they will increase the Social Security benefits by 1.5% in 2014 for those who are already collecting social security income.  The increase is slightly less than last year, which was 1.7%.  Comparing to past historical data, these annual benefit increases are very low especially when the inflation is at around 1.2%.  This news about the increase in the Social Security benefit is relatively good news even though it’s only 1.5%.  The bad news is that the government also decided to increase the maximum base salary that is eligible for Social Security tax.

In 2013, we paid 6.2% tax, which was matched by our employers; total amount of 12.4%.  The 6.2% tax was only applied to your base salary of $113,700, meaning tax did not apply to any salary earned above $113,700.  Here is the bad news for the workers.  In 2014, this maximum base salary will increase to $117,000, an increase of 2.9%.  Most of workers are not affected by this increase in Social Security tax because their salary earned doesn’t reach the maximum base taxable amount.  However, the trend poses a big concern for the workers as the government continues to increase the Social Security tax, FED OASDI/EE.

Social Security benefits are a huge payout for the government despite the increase in tax.  There are about 58 Million U.S. citizens collecting the Social Security paychecks.  Every month the government pays about $67 Billion in Social Security benefit checks.  That’s an average monthly payout of $1,162!  Annual payment is $804 Billion!  No wonder our Social Security tax continues to rise.  Do you think the government can sustain paying this much every year?  Only time will tell…

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