Happy New Year – and happy new you! Time to take stock of your joints, your gut, and your wallet. The latter includes the biggest source of wealth most of us will ever have – Social Security. For a young family, the insurance value of Social Security is worth about $200,000. We pay for Social Security benefits by paying the FICA tax, which is 12.4% of earnings split evenly between the employer and the employee up to a 2018 cap of $128,400. Ninety-five percent of us will pay FICA all year long because our annual earnings fall below the cap.
For example, the top-paid executive at Charter Communication (he makes $98 million a year and got a 500% raise last year) stopped paying by noon on January 1, right about when the ibuprofen kicked in to nurse New Year’s Eve hangovers. The CEO of CBS earned $68 million last year, a 22% raise from the year before, and will stop paying FICA tax by your first day back at work on January 2 (if you aren’t among the millions working on the New Year’s Day).
This game – ‘when do rich people stop paying for Social Security?’ – could go on forever. We can have fun with the calculations: who will finish paying by their first coffee break of the day? After brushing their teeth?