Why did Social Security take $1000 too much?

[TooMuchGlass]

Between our 3 W-2s, my wife and I made 75888.14. 6.2% of that is 4705.06, but our box 4s (SS withheld) add up to 5778.41.

She put nearly 18000 in her 401k. Is where it is coming from? Social Security and Medicare are taken out of earnings before it goes to your 401k?

[maizefolk]

Social Security and Medicare are taken out of earnings before it goes to your 401k?

Yup. 401k contributions are exempt from income taxes but not payroll taxes.

That's why you can get into trouble if you defer 100% of your paycheck and your employers software doesn't know to interpret that as "100% net of payroll taxes" ... you end up with a negative paycheck.

[Paul der Krake]

She put nearly 18000 in her 401k. Is where it is coming from? Social Security and Medicare are taken out of earnings before it goes to your 401k?

Yes.

[TooMuchGlass]

Wow, ok thanks guys.

.gov: "we won't tax you on some of your income if you choose to save it for retirement. Also, we will be taking money for your retirement from your retirement money."

Thanks, Uncle Sam. You've always got my back.

[MDM]

What is 6.2% times the sum of the W-2 box 3 amounts?

[maizefolk]

Wow, ok thanks guys.

.gov: "we won't tax you on some of your income if you choose to save it for retirement. Also, we will be taking money for your retirement from your retirement money."

Thanks, Uncle Sam. You've always got my back.

Oh it's not so bad. Those 401k contributions also count towards calculating your average monthly income when it comes time to figure out what social security payments will be some decades from now. As mustachian individuals, it's likely we will spend most of our working lives below the second bend point for average lifetime earnings where social security is actually quite a good value for the money withheld.*

Below $375,900 in lifetime earnings each $100 in social security taxes paid** translates to $41.47 each year in social security income until you die.

Above $375,900 but below ~$2.25M in lifetime earnings each $100 in social security taxes paid translates to $14.75 each year in social security income until you die.

*Of course it's also quite possible the program won't exist as we currently know it by the time lots of people on this board retire. *shrug*

**Of course your employer also pays $100 for every $100 you pay.