Here is a funny story I told my nephew after he came home happy and thrilled after he received his paycheck. When he looked at the deductions that came out of his paycheck then he had one question for me who is FICA.
I explained to him if you were an experienced worker will probably know what does federal tax on wages actually means. Unfortunately, there are two taxes that are deducted out of your paycheck. The first tax is call FICA which means Federal Insurance Contributions Act. It is the law for this tax to be taken out of your paycheck to fund both Social Security and Medicare through payroll taxes. However, the employer will share this cost with their employees.
When you pay your FICA contributions can earn Social Security credits. Now for 2016 in order to earn one credit, you must make at least $1,260.00 in wages. The most credits you can earn is four credits per year. Now day’s workers need a least 40 work credits to apply for retirement and Social Security Disability Income benefits. It will be a total of ten years to work in order to have 40 work credits. However, you must be old enough in order to receive retirement benefits.
The Social Security Administration pays benefits to workers who became disabled and no longer able to work and survivors when a worker passed away (die). In order to qualify, you need a number of credits and the benefits will be determined on your age and when you became disabled or passed away (die).
The only time you can get Social Security Retirement Benefits is at 62 years old. If you decide to retire before full retirement age, you Social Security Retirement will be a……………….
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