social-security (1)

Social security can be complicated and confusing if you have never learnt about it as a college student. Chances are if you haven’t taken a financial planning class either in college or in high school you probably only have a rough understanding on what it is or maybe you have no idea, which is ok, that’s what this article is here to change. As a college student to another college student here is an explanation of what Social Security is and what is important to know now even though we are young and retirement seems decades away. 

Let’s take the scenario that I earn $15 an hour, 10 hours a week. My weekly earning would be $150. Now I have to pay Social Security and Medicare tax called FICA or Federal Insurance Contributions Act which altogether is 7.65% (6.2% for Social Security tax and 1.45% for Medicare tax). For my earning of $150,  that would mean each paycheck I would be paying $11.48 in FICA tax. 

Everyone who is in the workforce contributes to Social Security Trust Fund (SSTF). Those who pay FICA will pay up to a cap of $128,400 for Social Security, but there is no cap on Medicare. Those who receive from the SSTF are the retired, disabled, children or who live in poverty. 

On the official government website for Social Security they explain it as:

“the money you pay in taxes is not held in a personal account for you to use when you get benefits. Today’s workers help pay for current retirees’ and other beneficiaries’ benefits. Any unused money goes to the SSTF to help secure today and tomorrow for you and your family.”

The Social Security card you got when you were little is responsible for this process, it has a 9 digit number on it that is personal to you, and only you. This number then records your covered wages or self-employment. 

As you work and pay FICA tax you earn Social Security credits, when you retire these will be used to calculate your retirement benefits. However, sometimes people decide to be paid in cash or “under the table” in order to avoid FICA tax and other taxes but this is not advised by Certified Financial Planners (CFP) because it does not get registered by Social Security which later means you cannot claim the benefits. It may seem like a good idea for the present day, but in the long run being paid by cash will not benefit you. 

Furthermore, the US is facing a problem due to baby boomers creating an aging population. There is not enough people in the workforce to support the number of those retiring that will be receiving benefits from Social Security. This means that the tale-end of the baby boomers and the generations after them will have their retirement benefits potentially be cut, in fact SSTF will be depleted according to Social Security Administration. 

As the future for Social Security benefits it is unsure, therefore it is important to save more and spend less. To think there is a reliable source in the future of Social Security benefits should not be case. It is much better to be resourceful through your own savings. 

To learn more about Social Security and how to save more, spend less work with a Certified Financial Planner (CFP) practitioner or reach out to the Financial Planning program here at California Lutheran University for more information.

0 About the author:Rosie Baker is a undergraduate student at California Lutheran University studying Communication with an emphasis in PR and Advertising. She is also minoring in Creative Writing.



Social Security Administration. (2019). Retrieved from

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