Understanding FICA: The Federal Insurance Contributions Act
The Federal Insurance Contributions Act (FICA) is a U.S. federal payroll tax that is mandatory for most workers and employers. It funds two critical government programs: Social Security and Medicare. These taxes are automatically deducted from an employee's paycheck. For the self-employed, these contributions are paid as part of the Self-Employed Contributions Act (SECA) tax. FICA contributions made throughout a person's working life are used to determine eligibility and benefit amounts for retirement, disability, and survivor benefits under Social Security, as well as for Medicare health coverage for those 65 and older or with certain disabilities.
There is no age-based exemption for paying FICA taxes. The determining factor is whether you have earned income. If you continue to work past retirement age, your wages or self-employment income remain subject to FICA taxes, just as they were during your younger working years. The only way to stop paying FICA taxes is to stop having earned income from a job or self-employment.
FICA Components: Social Security vs. Medicare
To fully understand why age isn't a factor, it's helpful to break down the two parts of FICA taxes.
Social Security Tax
The Social Security tax funds the Old-Age, Survivors, and Disability Insurance (OASDI) program. The tax is levied on an employee's wages up to an annual maximum, known as the wage base limit. For example, in 2025, the Social Security wage base is $176,100. Once an employee's earnings for the year exceed this amount, they stop paying the Social Security portion of FICA for that calendar year. This wage base limit is adjusted annually to keep pace with average national wage changes. It's crucial to remember that this limit is based on earned income, not age. Therefore, a high-earning worker of any age will stop paying Social Security tax once they reach the limit, and an older worker with earned income below the limit will continue to pay.
Medicare Tax
The Medicare tax has a different structure than the Social Security tax. It funds Medicare's Hospital Insurance (HI) program. There is no wage base limit for the Medicare tax. This means that every dollar of earned income is subject to the Medicare tax, regardless of how much you make. Furthermore, high earners may be subject to an Additional Medicare Tax of 0.9% on earned income over a certain threshold ($200,000 for single filers and $250,000 for married couples filing jointly in 2025). This also applies to earned income at any age.
Working in Retirement: What You Need to Know
Continuing to work after reaching full retirement age is becoming increasingly common. Many seniors choose to work part-time or even start a new business. Understanding your tax obligations in this scenario is vital for financial planning.
- Continued Employment: If you have a part-time job or are a W-2 employee, your employer will continue to withhold FICA taxes (both Social Security and Medicare) from your paycheck, regardless of whether you are already receiving benefits.
- Self-Employment: For those who are self-employed in retirement, you are responsible for paying the full 15.3% SECA tax (both the employee and employer portions) on your net self-employment earnings. You'll pay this tax for as long as you have net earnings from your business.
- Impact on Social Security Benefits: For those who continue to work before reaching full retirement age, earning income can temporarily reduce your Social Security benefits if you earn above a certain threshold. However, once you reach full retirement age, your benefits will no longer be affected by your earnings, though your wages will still be subject to FICA taxes.
- Investment Income: FICA taxes are only applied to earned income. Passive income, such as from investments, is not subject to FICA. However, high-income individuals may be subject to the Net Investment Income Tax (NIIT), a separate 3.8% tax on certain investment income.
A comparison of FICA taxes before and after retirement
| Feature | Before Retirement | After Retirement |
|---|---|---|
| Tax on Earned Income | Mandatory for most workers and employers | Mandatory for earned income (wages, self-employment) |
| Tax on Passive Income | Not applicable (no FICA) | Not applicable (no FICA), but high earners may pay NIIT |
| Social Security Wage Cap | Yes, annual limit applies | Yes, annual limit applies to earned income |
| Medicare Tax Limit | No limit on income subject to tax | No limit on income subject to tax |
| Additional Medicare Tax | Applies to high earners | Applies to high earners with earned income |
| Impact on Benefits | Contributions build eligibility and future benefit amount | Benefits may be reduced by earnings below full retirement age |
| Eligibility for Exemption | Rare exceptions (e.g., certain religious groups, some non-resident aliens) | Same rare exceptions apply |
Conclusion
There is no specific age at which you stop paying FICA taxes. The obligation to pay is tied directly to having earned income, not to your age or retirement status. As long as you are working and earning wages or self-employment income, you will continue to contribute to Social Security and Medicare through FICA taxes. While the Social Security portion of FICA has an annual wage limit, the Medicare portion does not. This continued payment of taxes, particularly for those who work past full retirement age, can ultimately increase your Social Security benefits in the future. For detailed information on your personal contributions and future benefits, you can consult the official website of the Social Security Administration.
