AUSTIN EDITION -- col Size of benefit depends on your level of earnings
By Cherryl Kjos
Austin Social Security district manager
You will receive your annual IRS Form W-2 in the mail sometime in January telling you how much you earned during the past year. It's a good time to discuss the relationship between your earnings, Social Security taxes and the benefits they generate.
In fact, some of the answers already may be at your fingertips. Since Oct. 1, 1999, Social Security has been sending out statements to people age 25 and older telling them how much they have paid in taxes and how much they and their families can expect in benefits when they retire, die or become disabled. And if your birthday is not close enough, you can call Social Security and have a statement sent to you.
Many people believe that how much they get in Social Security benefits will depend on how much they pay in Social Security taxes. That's not quite true. Actually, your Social Security benefit amount depends on how much you earn. It's based on your average annual earnings over your working career and generally the higher the average, the higher your benefit amount.
When you worked last year, you paid Social Security taxes at a rate of 7.65 percent of your earnings up to $80,400. (This "maximum amount of taxable earnings" increases each year with increases in wage levels; in 2002, it will increase to $84,900.) The Social Security tax rate for 2002 remains the same as it was in 2001.
The Social Security tax is a flat tax -- everybody pays on his or her earnings at the same rate. However, the benefit formula is progressive. It is weighted to pay a higher rate of return to low earners. In general, low earners may expect to receive monthly benefits equal to about 53 percent of their prior monthly earnings. Average earners get about 40 percent and maximum earners about 24 percent.
To find out how all this adds up to Social Security protection for you and your family, you should review your Social Security Statement. You also can get your statement from Social Security by calling our national toll-free number, 1-800-772-1213. Or you can order it from the Internet at www.ssa.gov.