SURVEY SAYS: What Will You Do With FICA "Savings?"

January 6, 2011 ( - Courtesy of that tax compromise bill signed into law last month, everybody who pays into Social Security will see those FICA withholdings reduced, at least in 2011.  

This week I asked readers what THEY planned to do with that money.

Nearly a quarter (23.0%) said they planned to save it, while just 2.7% said they would spend it, though 16.2% said they would spend some, save some.

About one-in-ten admitted they would “probably just lose sight of it”, and 3% – weren’t sure.

Now the rest – and we’re talking nearly 45% – opted for “other”, though I would probably have grouped most of these as “spending.”  Consider that a number chose to specifically cite reducing debt (rather than considering that spending), many said it would be eaten up by increased costs from a range of necessities (again, rather than considering that spending), and some – well, some were increasing their retirement plan savings (I suppose instead of considering that saving?). 

Regardless, here’s a sampling of the verbatims:

Won’t it just get eaten up in other taxes?  I can’t imagine I’ll see any of it.

Since I am projected to reach the 2011 (k) caps I put the additional 2% into my HSA.

Saving by putting more in an EE stock purchase plan…timing is good.

Unfortunately it will be probably spent on the staples of life like gas and food.  Thank you dollar value for decreasing. Sheesh.

I plan to save it since it will have a negative affect on the future of Social Security, which I would like to collect. It sounds good to get extra money, but that is money I have been used to paying and it angers me that with the problems in Social Security,

Give it to the homeless person standing on the corner with his sign “homeless and unemployed.”

Seems like a good idea to me, but why does adding 2% to one's 401(k) contribution defeat the purpose of providing more  economic stimulus?  Does 2% into the market have any less stimulative effect than 2% spent at Wal-Mart or Macy's?  Likewise with the argument that "tax cuts for the wealthy" don't stimulate the economy because wealthy people will only save or invest the money.  Even if wealthy people put their tax savings into a bank savings account, isn't one supposed part of the current economic woes lack of sufficient funds to lend?  So why is putting more money into the bank a bad thing?

Put it towards debt

Save some but when spending rest will use to cover unusual one-time expenses (i.e. upcoming surgery) and not just on normal living/bills.

I will use it to offset the "Making Work Pay" tax credit that expired.

Well, since it'll be offset by the elimination of the Making Work Pay tax credit, I expect little to no difference in take home pay.

While my Social Security rate will be decreased by 2 % , my dependant insurance premium is going up by more than 2% -- so basically "what money"?

My wife just had a baby and we'll be a single income family as of 1/1/2011.  I will use it to prevent having to lower my 401(k) deferral!

I won't see it.  I pay into the state's retirement system and don't pay social security.


Pay off car faster so I can start paying off mortgage faster so I can retire faster.

Bump up my 401k deferral 2%

Since I work for a public pension fund that does not participate in Social Security, I will not have withholdings reduced.  But, I hope everyone who does spends a little and saves a little.

What money, the decrease in social security was offset by the increase in the federal withholding

Use it to pay down credit card debt

I had already decided to up my 401k deferral effective Jan 1.  That will eat up half of my "raise."  The other half will go in the ol' checking account.

Pretend it's a merit increase since the State has frozen employee wages for the past several years.

Increased my 401k by 2%.

Just what I do with the remainder of my paycheck. It goes into the home budget trough.

pay down debt

"I have a son in college,  I will save it until next semester's tuition is due, then I will spend it."

Are you kidding - I haven't seen a raise in pay since 7/1/2008.  Lately, every month my outgo exceeds my income.  Of course I'm going to spend it.

Use savings from this tax to pay for all the other local taxes that just started with the new year. 

Put into 403(b).

I liked the plan sponsor's idea and have increased my 401k contribution 2%.  I do not want to get used to spending it to only have it taken away down the road.

Increase my 401(k) Plan contribution rate!!!

I don't know that I would even notice the difference at this point what with health insurance premiums going up and the taxes on my life insurance going up because I hit one of those "important" birthday years, I may end up getting lower pays despite the tax break.

Beer money!   ;^)

Pay the recent state tax income increases.

But this week’s Editor’s Choice goes to the reader who noted, “I've already increased my 401k contribution in anticipation of this change.   In addition, since I am 50 this year (yikes), I am doing the catch up contribution as well.   And since I am not considered an HCE, let's just say my 401k contributions are more than my net pay!”

Thanks to everyone who participated in our survey!