What is FICA?

If you get a paycheck, you’ve probably looked at the money taken out of it already and wondered What is FICA?

FICA money goes to retired people

Well if you think about where your money will come from in retirement, you’ve halfway there to understanding what FICA is.  FICA stands for the Federal Insurance Contributions Act.  That is what funds Social Security and Medicare…federal programs that provide for us in old age.

if you pay fica, then someday you can get social security and health insurance

So basically, the FICA amount taken out of your paycheck goes towards income for retirees.  The amount of money a retiree receives out of Social Security depends on how much he or she put into it.  So, if you feel bad about that FICA amount missing from your current paycheck, there is some consolation that someday you will be able to draw on the FICA money yourself, after you retire.

what is the fica amount taken out of my paycheck?

FICA goes towards two things, each of which takes a different percentage out of your check:

  1. Social Security: 12.4% of your earned income goes towards this
  2. Medicare: 2.9% goes towards this

Unless you work for yourself, you pay half the percentage and your employer pays the other half.  If you are self-employed, you pay the full amount yourself.

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