How does your current (or future) employment affect your Social Security or Medicare benefits?

Final answer:

Employment impacts your Social Security and Medicare benefits because a worker pays a percentage of their income into these 'retirement insurance' schemes. Payroll taxes for these programs are shared by the employer and employee, with economists pointing out that the employer's share often ends up being covered by the employee through lower wages. Independent contractors have to cover both sides of the payroll tax.

Explanation:

Your current or future employment affects your Social Security and Medicare benefits in a few key ways. Firstly, workers pay a percentage of their income into Social Security and Medicare, which are forms of retirement insurance that provide income and health care benefits when they become elderly or sick. These are not 'insurance' in the traditional sense, but they function similarly, in that regular payments are made into the programs today in exchange for future benefits.

In terms of payroll taxes, both the employer and the employee contribute. An employee sees a deduction of 6.2% from their paycheck for Social Security, and 1.45% from Medicare. However, the employer's half of the taxes is often passed along to the employees in the form of lower wages, so in reality, the worker pays all of the payroll taxes. If you are a member of the “gig economy” and considered an independent contractor, you must pay both the employee and employer side of the payroll tax.

Learn more about Payroll taxes here:

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