FICA taxes fund two federal insurance programs: Social Security and Medicare

When you see "FICA" deducted from your paycheck, that money goes to two separate programs run by the federal government. Social Security collects 12.4% of your wages (you pay half, your employer pays half if you're an employee). Medicare collects 2.9% of your wages the same way. Together, these two programs account for nearly all FICA withholding. The money doesn't sit in an account with your name on it — it flows into federal trust funds that pay benefits to current retirees, disabled workers, and people on Medicare right now.

The Social Security Administration and Centers for Medicare & Medicaid Services (CMS) manage these funds separately. Social Security uses its revenue to pay retirement benefits, survivor benefits (for family members of deceased workers), and disability benefits. Medicare uses its revenue to pay for hospital insurance (Part A), which covers inpatient care, and to help fund the insurance trust that backs up Part B (medical insurance) and Part D (prescription drug coverage).

Key Takeaways

  • Social Security FICA taxes (12.4% of wages) pay current retirement, survivor, and disability benefits — not a personal savings account.
  • Medicare FICA taxes (2.9% of wages) fund hospital insurance and support the trust funds behind medical and prescription drug coverage.
  • Both programs operate on a pay-as-you-go system where current workers' taxes pay current beneficiaries' benefits.
  • Your FICA record is tracked by Social Security using your Social Security number, and you can view your earnings history online.

How Social Security FICA taxes are spent

Social Security collects 12.4% of your wages up to a wage cap (the cap changes each year and was $168,600 in 2024). That money goes into the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The OASI fund pays monthly benefits to people age 62 or older who have worked long enough, and to their spouses and children. It also pays survivor benefits to family members when a worker dies.

The DI fund pays benefits to workers under full retirement age who cannot work due to a severe medical condition, and to their family members. In 2024, the average monthly Social Security retirement benefit was around $1,900, though the actual amount depends on your earnings history and the age you start collecting. These payments come directly from the FICA taxes collected that month and the previous months — there is no separate account holding your contributions.

Social Security publishes an annual report showing how much money came in from FICA taxes and how much went out in benefits. The trust funds also hold reserves built up over decades when tax revenue exceeded benefit payments. These reserves help cover the gap in months or years when benefit payments exceed incoming tax revenue.

How Medicare FICA taxes are spent

Medicare collects 2.9% of your wages with no wage cap — meaning you pay Medicare tax on all your earnings, no matter how high. This revenue goes into the Hospital Insurance (HI) trust fund, which pays for Part A benefits. Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services for people age 65 and older and some younger people with disabilities or end-stage renal disease.

The HI trust fund is separate from the Supplementary Medical Insurance (SMI) trust fund, which backs Part B (doctor visits, outpatient care, lab tests) and Part D (prescription drugs). Part B and Part D are funded partly by beneficiary premiums and partly by general federal revenue, not directly by FICA taxes. However, FICA revenue supports the HI trust fund, which is essential to the overall Medicare system.

Medicare publishes detailed financial reports each year showing HI trust fund income, spending, and reserves. Hospital stays and skilled nursing care are the largest expenses in the HI fund. The fund also covers preventive services like screenings and vaccines, which are meant to reduce costs by catching illness early.

Why FICA taxes don't go into a personal account

Many people assume their FICA taxes are saved in an individual account and paid back to them later. That is not how these programs work. Social Security and Medicare operate on a pay-as-you-go system: the taxes collected today pay the benefits of today's retirees and disabled workers. When you retire, your benefits will be paid by the FICA taxes of workers at that time.

This system has worked since Social Security began in 1935 because the ratio of workers to beneficiaries was much higher then. As the population ages, fewer workers support each beneficiary, which is why both programs face long-term funding challenges. The Social Security Administration and CMS publish annual reports projecting when trust fund reserves may be depleted if no changes are made to tax rates or benefit levels.

Your FICA record is tracked individually by Social Security using your Social Security number. You can view your earnings history and see an estimate of your future benefits by creating an account on ssa.gov. This record determines how much you will receive in benefits, but the money itself is not held separately — it is part of the overall trust fund pool.

What happens to FICA taxes if you die before retirement

If you die before reaching retirement age, your FICA contributions do not disappear. Your family members may be may have access to to survivor benefits paid from the Social Security trust fund. A widow or widower at full retirement age, a widow or widower caring for a child under 16, unmarried children under 19 (or 19 if still in high school), and dependent parents age 62 or older can all receive benefits based on your earnings record.

The amount each family member receives depends on your earnings history and their relationship to you. These benefits are paid from the same OASI trust fund that pays retirement benefits. If you have no family members may have access to to survivor benefits, your FICA contributions still support the system for other beneficiaries — they are not refunded to your estate.

How to check your FICA tax record

The Social Security Administration maintains a record of all FICA taxes withheld from your paychecks. You can view this record by creating a my Social Security account at ssa.gov. The account shows your earnings history year by year, which is used to calculate your future Social Security benefit amount. You can also print a statement showing your estimated retirement, disability, and survivor benefits.

It is important to check your earnings record periodically to make sure your employer reported your wages correctly. If you spot an error, you can contact Social Security to request a correction. Errors are usually caught within a few years, but correcting them quickly protects your future benefit amount. You can also call Social Security at 1-800-772-1213 to request a paper statement if you do not use the online account.

Frequently Asked Questions

Can I get my FICA taxes back if I leave the country?

No. FICA taxes fund Social Security and Medicare, which are insurance programs, not savings accounts. You cannot withdraw your contributions. However, if you worked long enough in the United States, you may still be may have access to to Social Security benefits even if you live abroad. The rules vary by country and your citizenship status.

What if I paid FICA taxes but never worked long enough to get Social Security?

Social Security requires 40 credits of earnings to receive retirement benefits (roughly 10 years of work). If you do not reach 40 credits, your FICA contributions go into the trust fund to pay other beneficiaries' benefits. You will not receive a refund. However, your family members may still be may have access to to survivor benefits if you die.

Do self-employed people pay FICA taxes?

Yes. Self-employed people pay both the employee and employer portion of FICA taxes, called self-employment tax. This is 15.3% of net earnings (12.4% for Social Security up to the wage cap, plus 2.9% for Medicare with no cap). Self-employed people report this on Schedule SE when they file their tax return.

Why do I pay Medicare tax if I am young and healthy?

Medicare FICA taxes fund the Hospital Insurance trust fund, which pays benefits to people age 65 and older and some younger people with disabilities or end-stage renal disease. You pay into the system now so that when you turn 65, the FICA taxes of workers at that time will pay your benefits. It is an insurance program, not a health savings account.

Can FICA taxes be used for anything other than Social Security and Medicare?

No. By law, FICA taxes can only fund Social Security and Medicare. They cannot be redirected to other federal programs. The Social Security Administration and CMS publish annual reports showing exactly how much FICA revenue came in and how it was spent on benefits.