Dear Rusty: I'm 72 and receiving full Social Security benefits but still working full time. Why does the government keep taking money from my paycheck for Social Security? I've asked experts about this and they say it's the law. This doesn't satisfy me. About $4,400 was deducted from my pay in 2023 for Social Security, and I get a small increase in benefits, but it doesn't match what I pay. I don't understand why the government taxes me for Social Security when I'm already receiving full benefits. Can you explain?
Signed: Working Senior
Dear Working Senior: I won't attempt to explain the government's reasoning, but I can explain why people who are already getting Social Security benefits still have to pay Social Security taxes when working.
This goes back to 1935 and the group appointed by President Franklin D. Roosevelt to establish the Social Security program. This group decided how the program would be funded, Congress approved it, and FDR signed it. The basic idea was this:
Workers (and their employers) must contribute to Social Security through payroll taxes to support the program (now known as “FICA” for employees and “SECA” for the self-employed). When the program started, certain employees and their employers were required to each contribute 1% of the employee’s first $3,000 of earnings.
These amounts have increased over time. Initially, only specific workers were part of Social Security, but that has changed so that now almost everyone who works must pay Social Security taxes.
Since 1937 and even now, the Social Security taxes paid by current workers are used by the government to pay benefits to current recipients. In other words, Social Security operates as a “pay as you go” system, where income from current workers (and their employers) is used to pay benefits to current recipients.
The payroll taxes collected are not placed in a personal account for the worker; instead, they are used to meet current Social Security payment obligations. Any surplus money collected is invested in special government bonds as reserves for future use (though the current annual income from Social Security is less than the annual program costs, which is a separate issue).
The funding method established in 1935 and implemented in 1937 still holds true; workers and their employers must contribute to the system to fund benefit payments to current recipients, including those who are already receiving benefits.
For your information, there was a time when people would lose all their benefits if they worked after starting their Social Security benefits. Thankfully, that rule no longer applies, so those receiving Social Security benefits can keep getting them while working, but they still have to pay into the program from their work earnings to help pay benefits to other recipients.
I hope this gives some understanding of why you need to keep contributing to Social Security even after you start getting your benefits. It's because the program is mainly funded by workers' payroll taxes on their earnings, with some money also coming from interest on Trust Fund reserves and income tax on Social Security benefits. Almost everyone who works helps pay benefits to current recipients.
Russell Gloor is a certified Social Security adviser by the Association of Mature American Citizens: https://amac.us/social-security-advisor.
