More money in your walletSocial Security tax dips in 2011
Workers will see a slight increase in their take-home pay after Jan. 1. That is when Social Security payroll taxes will drop from 6.2 percent to 4.2 percent in 2011.
By: Wendy Reuer, INFORUM
Workers will see a slight increase in their take-home pay after Jan. 1.
That is when Social Security payroll taxes will drop from 6.2 percent to 4.2 percent in 2011.
The 2 percent decrease is part of President Barack Obama’s compromise to extend former President George W. Bush’s tax cuts that were signed into law on Dec. 17.
Although employees will see more money in their wallets, it has not yet been determined if those who receive Social Security benefits will be affected.
Howard Kossover, a public affairs specialist with the Social Security office in Grand Forks, said it is too soon to tell what the effect will be.
“The short answer is no. There is no impact anticipated,” Kossover said. “But, the ink is still drying (on the law).”
Kossover said the difference in the withholding tax and what will be paid in Social Security benefits will be made up by funds from the general fund.
The new law gives employees who earn less than $106,800 a consistent increase in paychecks throughout 2011. However, for those who make more than $106,800, once earnings pass that threshold, the tax cut will disappear.
For an employee who makes $25,000 per year and does not contribute to a flexible spending account, they can expect to see about a $19 increase in bi-weekly paychecks.
Financial advisers are busy alerting clients to the upcoming tax savings. At Edward Jones, clients are encouraged to reinvest their savings in the future.
“You may want to consider investing at least part of this savings in another retirement account, such as an IRA,” said Matthew DeVries, a West Fargo Edward Jones financial advisor.
As far as Social Security’s long-term future, Doug Nguyen, a deputy regional communications director in the Chicago regional office, said the benefits program is safe for now.
“In terms of the trust fund, our Social Security trustees indicated earlier this year that our trust funds will be sufficient to pay benefits up through 2037,” Nguyen said. “At that time, if nothing is done, there will still be sufficient tax revenue to pay approximately 78 percent of the benefits.”
- Calculate the increase you should see in your own 2011 paychecks here: www.kiplinger.com/tools/2011_Social_Security_payroll_tax_cut_calculator/.
Readers can reach Forum reporter Wendy Reuer at (701) 241-5530