What Percent of Workers Max Social Security?
By Kevin Estes
I learned an amazing fact the other day.
6% Earn More Than the Social Security Max
Each year, only about 6% of covered workers earn more than the Social Security taxable maximum!
The maximum changes each year based on the growth in the national average wage. The limit is $160,200 for 2023.
Earned income above that avoids the Social Security tax.
What’s Included in Social Security Wages?
Social Security earnings includes:
base salary and wages
bonuses and commissions
Restricted Stock Unit (RSU) vests, etc.
Benefits of Reaching the Maximum
Tech workers often go weeks or even months without having to pay the Social Security portion of the FICA (Federal Insurance Contributions Act) tax each year. That 6.2% of gross pay instead goes to their checking account.
Hitting the Social Security maximum improves cash flow - which is especially helpful going into the holiday season!
However, these employees must still pay the Medicare portion of the FICA tax. There’s no limit on that 1.45% tax on earned income.
Did the 6% Surprise You?
I was shocked only 6% of covered workers reach the Social Security taxable maximum income each year.
How about you? Were you surprised?
Does knowing change your financial perspective?
If you’re interested in a review of your specific situation…
Disclaimer
In addition to the usual disclaimers, neither this post nor this image includes any financial, tax, or legal advice.
