Washington, DC - Social Security Matters by AMAC’s Certified Social Security Advisor C.J. Miles Association of Mature American Citizens:

QUESTION: I’ve been told that you need to work the equivalent of 10 years in order to get Social Security.  But most of my life I’ve worked odd jobs like landscaping, painting, construction, etc.  I’ve had a few temporary jobs, but definitely not 10 years’ worth.  Some people call the work I’ve done “self-employed”, but I didn’t own a company or anything like that.  Does this mean I won’t be eligible for Social Security?

ANSWER: That is a great question, and as with many other social Security questions, I will answer “it depends.”  The wok you described is considered “self-employed” for Social Security purposes.  It does not matter whether you actually owned a company.  What DOES matter is whether you reported the wages for those odd jobs to the IRS and paid taxes on them.  For example, you mentioned construction work.  Did the person who hired you give you a 1099?  Even if you did not have a 1099, did you report any earnings for this work and pay taxes on it?  If you did, the IRS would have required you to pay Social Security taxes.

Most people have heard of FICA taxes.  FICA stands for the Federal Insurance Contributions Act and it requires employers to withhold taxes from employee earnings to fund the Social Security and Medicare programs.  The employer also pays a tax equal to the amount withheld from employee earnings.  Since there is no “employer” to pay this portion for the self-employed, there is another tax called SECA, which stands for the Self-Employed Contributions Act where the self-employed pay the employer-portion of Social Security and Medicare taxes.

So what does this mean exactly?  Currently, if you have a regular W-2 job (like the temp jobs you mentioned), the employer would pay 6.2% of your wages for Social Security taxes.  You would also pay 6.2% of your wages.  Therefore, if you are self-employed and do not have an official “employer,” you have to pay the entire Social Security tax of 12.4%.  If you did not pay this during the year, you would pay it when you file for your tax return for the entire year.  The IRS does allow the self-employed to deduct half of that amount.

One other thing – remember that this self-employment rule applies to Medicare coverage, too.  You pay twice as much (2.9% instead of 1.45%) as a self-employed individual in order to be eligible for Medicare.

So in order to answer your question, you have to ask yourself if you reported earnings on your self-employment income.  If you did, did you earn enough between your temporary positions and self-employment to have 10 years’ worth of earnings to qualify for Social Security. If you are unsure, you can check how many credits you have (you need 40 credits, which equals 10 years) by creating a mySocialSecurity account at www.ssa.gov .

QUESTION: From what I understand, our Social Security benefits are based on our highest 35 years of earnings.  However, there is a maximum amount of income that is subject to Social Security tax.  That really doesn’t seem fair.  If people with high earnings are getting a benefit based on those high earnings but didn’t pay taxes on all of those earnings, of course it’s going to hurt the trust fund. How does the government justify this?

ANSWER: What you are referring to is called the “Tax Max” and has been a hot topic in the news and for politicians recently.  There are a lot of different opinions out there about whether increasing the tax max, or even eliminating it altogether, will help the sustainability of the trust fund.  What is really important, though, is understanding exactly how the tax max works.

First, you are correct that benefits are based on your highest 35 years of earnings.  However, there is a common misconception regarding what happens with the income beyond the threshold that is not taxed.

For example, in 2015 the tax max is $118,500. Therefore, if John Doe makes $200,000, he will pay the Social Security tax of 6.2% on $118,500, not $200,000.  Now let’s say 2015 is one of the highest in the 35 years of John’s earnings.  When he files for Social Security, they will calculate his benefit using an income of $118,500in 2015, NOT $200,000. Therefore, no one is receiving a Social Security benefit on those earnings that were not taxed.

To ask a question about Social Security contact AMAC’s C.J. Miles at This email address is being protected from spambots. You need JavaScript enabled to view it..