Did You Just Get A 6.2% Raise At Work?

It’s pretty amazing to me how many people still don’t understand our payroll tax system.  When you work as a W-2 for an employer, both you and your employer are going to pay certain payroll taxes.  The two main types of taxes are the Federal Insurance Contributions Act (FICA) tax and the Medicare tax.   Both you and your employer pay 6.2% into FICA up to $132,900 this year and Medicare is a perpetuity tax at 1.45%.  Depending on your pay grade and what bonuses you have earned, you may have already received a raise in your paycheck and don’t even know it. The reason is, once you hit the $132,900 limit, you will no longer be paying into Social Security.

Unfortunately, since there are many individuals who pay their full amount into social security and their income exceeds $132,900 in a particular calendar year, your HR department won’t send you a notice that you now have an extra 6.2% in your paycheck for the rest of the year.   This 6.2% phenomenon can happen early in the year for those who get large first-quarter bonuses or make a big commission check, but for many of you, it will happen toward the end of the year.   Surely this money can be saved because you were able to make do without it from the beginning of the year until this point and time.  Here are a few ideas of what to do with your extra 6.2% in every paycheck.

  • Max out your 401(k) if you haven’t already in 2019. For those under the age of 50, you can save up to $19,000, and if you turned 50 this year or are older than 50 you can save up to $25,000 this year with the $6,000 catch-up provision. 
  • Max out your FSA or HSA plans. Both of these can help you lower your 2019 tax liability.  
  • Pay down consumer debt. If you have any built-up credit card debt or automobile loans, start making extra payments and clear out unnecessary nondeductible consumer debt.
  • Make an extra payment on your mortgage. Doing this every year might actually cut 5 or more years off the shelf life of your 30-year mortgage. 
  • Add to your children’s college education accounts. Whether you have a 529 plan, UTMA/UGMA, or Education IRA, add some additional monies toward paying down future college costs. In some states, you also get a state income tax deduction for your 529 contributions. 
  • Set up a holiday fund. Open an account at your bank or credit union and deposit these extra monies so you don’t have credit card debt going into the New Year.

I am always about trying to help you increase your bottom line – this should be an easy 6.2%- don’t waste this golden opportunity. 

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves


My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

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