Airstud From United States of America, joined Nov 2000, 2156 posts, RR: 1 Posted (3 years 12 months 1 day 12 hours ago) and read 3213 times:
Well in 2010 I will get serious about retirement planning (I'm 37 so it was time to get serious awhile ago). I've been just coasting along figuring my 401(k) contributions will take care of me, but now I want to be more proactive-like.
So I am examamining my pay stubs from over the years. I really have not looked closely at these things for a long time!! For you see, I remember when I worked at the Osco Drugstore (store #985, Acton Massamachusetts!! w00t w00t!!!!), our deductions were Federal income tax, State income tax (being MA, that was like 9000%), and "FICA." FICA was subdivided into SS and Medimacare.
I'm looking at my stubs for the past four years (others are in storage) and it seems like there are Federal deductions (in addition to income tax) for "OASDI/EE" and "MED/EE." Well I know CA SDI is California State Disamability Insurance, but what does "OASDI/EE" stand for, and the EE in "MED/EE?" Judging from the withholding rate (6%ish), it is plain that OASDI is just the new term for SS, but wha....
Also, what is the deduction scheme for CA state SDI? In 2005 the YTD deductions equaled 1.05% of gross pay, for 2006 it was 0.78%, 2007 it was 0.58%, 2008 we're back up to 0.78%, and so far this year (with but one 2009 paycheck to go) we're already back up to 1.07%. That's a lot of variance!!!
Gatorfan From United States of America, joined Oct 2009, 330 posts, RR: 1 Reply 1, posted (3 years 12 months 1 day 10 hours ago) and read 3190 times:
OASDI/EE - Old Age Survivors and Disability Insurance (EE = employee) portion (6.2%)
MED = Medicare Employee portion (1.45%)
Combined these two total 7.65% of your gross income to about $106,800 (the amount is indexed for inflation each year). Above that limit the OASDI goes to zero and you only play MED.
Your employer matches these contributions. Combined these are referred to as Social Security Taxes even though only the OASDI portion of the tax goes to social security.
The irony behind all this is that the combined employer & employee contribution is 15.3%. That's the equivalent of a fully funded 401k for every working person in the country.
The MED portion of the tax is the most regressive tax this country has at the federal level because it is not refundable. Many people end up paying more in social security taxes than federal income tax because of the standard deduction and personal exemptions in addition to the earned income tax credit. However, NOTHING reduces your social security tax obligation.
If politicians really wanted to give the middle class a tax break, they'd repeal the annual limit on MED contribution and create an exemption for the first $20,000 of annual earnings.