A Foolish Take: Social Security's Wage Base Gets Another Big Lift

Tens of millions of Americans rely on Social Security to help them make ends meet in retirement. Each year, key changes to Social Security affect the benefits that participants in the program receive, especially because monthly payments are tied to changes in the cost of living.

Another thing that typically changes annually is how much money the Social Security Administration levies in payroll taxes. There's a maximum dollar amount of wages, salaries, and other earned income that's subject to the Social Security payroll tax of 6.2%, and employers are also required to pay an equal 6.2% amount out of their own pockets. That maximum amount, known as the Social Security wage base, is also subject to inflationary adjustments. However, the adjustment is tied not to costs of living but rather to rising wage levels, and so the increases differ in size from what recipients see in their annual pay increases.

Data source: Social Security Administration. Chart by author.

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Source Fool.com