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By AMAC Certified Social Security Advisor Russell Gloor, Association of Mature American Citizens

Dear Rusty: I am collecting full Social Security benefits at age 72 and also working full time. Why is the Federal Government still taking money from my paycheck? I have written to Social Security experts on this issue, and they tell me “It’s the law.” That is not a good answer for me. Approximately $4,400 was taken from my pay in 2023 for Social Security and, yes, I get a pittance of a COLA increase, but not equal to what I pay. No one has been able to fully explain the Federal Government’s thought process on taxing me for Social Security when I am getting full Social Security benefits. Can you? Signed: Working Senior

Dear Working Senior: Far be it from me to try to explain the federal government’s thought process on anything, but I can explain why those already collecting Social Security benefits must continue to pay Social Security payroll taxes while working.

It actually goes back to 1935 and the panel commissioned by President Roosevelt to create America’s Social Security program. Said panel determined how the program would be financed, Congress approved it, and FDR signed it. That methodology was essentially this:

Workers who earn (and their employers) must contribute to Social Security via payroll taxes to fund the program (we now know this as “FICA” for employees and “SECA” for the self-employed). When the program first started, certain employees and their employers were required to each contribute 1% of the employee’s first $3000 of earnings. Obviously, those amounts have risen over the decades. And, for clarity, only certain workers originally participated in Social Security, which has also changed over the decades so that now nearly everyone who works must pay Social Security payroll taxes.

Starting in 1937 and still today, Social Security payroll taxes paid by those now working are used by the federal government to pay benefits to those who are currently receiving. Said another way, Social Security is a “pay as you go” program where income from those working (and their employer) is used to pay benefits to those receiving. Payroll taxes collected aren’t put into a personal account for the worker; rather they are used to meet current Social Security payment obligations. Any excess money collected is invested in special issue government bonds as reserves for future use (although current annual Social Security income is less than annual program costs – an entirely different topic).

So, the financing method enacted in 1935 and started in 1937 still applies – those who work and earn (and their employers) must pay into the system to fund benefit payments to those who are now receiving – and that includes those workers who are already collecting their Social Security. FYI, there was a time when, if someone worked after starting their Social Security benefits, they lost all of their benefits. Fortunately, that rule no longer exists, so those who are collecting Social Security benefits can now continue to get benefits if they work, but they must also still pay into the program from their work earnings to help pay benefits to Social Security recipients.

I hope this provides some insight for why you must continue to contribute to Social Security even after you have started collecting your benefits. It is a result of how the program is financed – predominantly by workers through payroll taxes on their earnings (and to a lesser extent from interest on Trust Fund reserves and income tax on Social Security benefits). With very few exceptions, everyone who works helps pay benefits to those now receiving.

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