Most of those who receive Social Security are reasonably happy at the announcement earlier this month that their benefits will be going up in 2024. The annual announcement from the Social Security Administration set the cost-of-living adjustment (COLA) that will take effect in January at 3.2%. That's less than the big 8.7% boost that Social Security recipients got in 2023, but it still represents a larger increase than what seniors have seen in most years recently.

In order to finance those higher payments, Social Security  will tap into its trust funds. However, the vast majority of money that pays benefits for current recipients comes from payroll taxes that current employees and self-employed business owners pay. The payroll tax rate has stayed the same for years, but higher-earning workers can expect to pay more in payroll taxes as a result of one key move from Social Security.

The payroll tax for Social Security is relatively simple. Employees have 6.2% of their pay withheld to go toward funding the Social Security program. Their employers pay a matching 6.2% amount as well. For those who are self-employed, the payroll tax combines the employee and employer contributions, meaning that a total levy of 12.4% gets charged.

Continue reading

Source Fool.com