Understanding The Relationship Between Your Taxes and Medicare

Are you irritated because you owe Uncle Sam a fortune in taxes each year? It wouldn’t be easy to disagree with you if you are.

Are you also irritated because you have to pay so much for Social Security and Medicare? If you think that way about paying for Social Security and Medicare, we must say that we disagree with you for several reasons. We’re guessing you’re happy with your current Social Security and Medicare coverage. If you aren’t yet old enough to benefit from those benefits, we believe you will reconsider once you are. We don’t think you’ll be grumbling when those Social Security payments start coming in and when you become eligible for Medicare, which provides good healthcare coverage and functions smoothly.

But there’s another reason you shouldn’t be upset about paying for Medicare.

How is Medicare funded?

The Social Security Administration (SSA) pays for Medicare via taxes prescribed by the Federal Insurance Contributions Act (FICA). You only pay 1.45% of your annual wages to FICA.

Our employers then match that contribution and pay an additional sum to FICA equal to 1.45% of our wages. However, don’t be irritated because your company pays the second 1.45%.

Even if you aren’t a natural mathematician, you can immediately understand that 2.9% of your yearly income is allocated to fund these two programs. In turn, that will pay for your retirement income (via Social Security)and your healthcare coverage (via Medicare) after you reach your “golden years.”

So go ahead and get upset if you want to. However, keep in mind that you are not paying 20% or 30% of your annual salary to fund Social Security and Medicare – you’re paying 1.45% interest.

How does the government fund Medicare?

We’ll tell you what happens to the 1.45% of your income that you pay in FICA taxes each year before Uncle Sam distributes it to people currently receiving Social Security and Medicare.

How much money does CMS give out each year to fund these programs?

CMS spent $776 billion to support Medicare in the fiscal year 2020, accounting for nearly 12% of the overall federal budget. Since 1970, the number of persons registered in Medicare has more than tripled, rising from 20 million in 1970 to approximately 63 million in 2020, with an estimated 87 million in 30 years.

What Happens to the Money the Government Uses to Pay for Medicare?

Two Treasury Department trust funds fund Medicare. These monies can only be used for Medicare, according to the law.

So, you’re still grumpy, right?

We hope not because no other government programs will give you more for a 1.45% commitment of your annual salary.

Contact Information:
Email: rick@andrikfinancial.com
Phone: 9568933225

Bio:
Rick Viader is a Federal Retirement Consultant that uses proven strategies to help federal employees achieve their financial goals and make sure they receive all the benefits they worked so hard to achieve.

In helping federal employees, Rick has seen the need to offer retirement plan coaching where Human Resources departments either could not or were not able to assist. For almost 14 years, Rick has specialized in using federal government benefits and retirement systems to maximize retirement incomes.

His goals are to guide federal employees to achieve their financial goals while maximizing their retirement incomes.

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