Elizabeth Ayoola

Yes, good to see Sean.

Right.

Batilda mentioned changes to how high earners can make catch-up contributions this year.

Now, the change states that if you are a high earner making FICO wages over $150,000, then you have to make those contributions to a Roth account.

And that Roth account can be an IRA.

It could be a 401k, anything of the likes.

Now let's answer Batilda's question about what FICA taxes are first, and then we can look at the implications of the new changes.

FICA stands for Federal Insurance Contributions Act and is federal payroll taxes that funds some social insurance programs.

Now, both you and your employer contribute to this tax.

6.2% of your gross income goes to paying Social Security tax, and then another 1.45% goes to Medicare taxes.

Good thing is that your employer matches each of those contributions.

So you're not paying the whole thing yourself.

And also, it's worth noting that FICA taxes are separate from your federal income taxes that you pay.

And then really quickly, because I always hear about this all the time, I want to add that a common misconception about FICA taxes is that they're like a savings account for your future retirement benefits.

I'm sorry to break it to you, but they're not.

Now, those taxes help to pay benefits for people who are currently retired and for other benefits like disability, surviving spouses and the likes.

Now, anything that isn't used goes towards Social Security trust funds, and it's invested in special issue U.S.

Treasury securities.

A downside of this new rule is that if you are earning more now than you anticipate you would have, say, during retirement, you're likely going to end up paying more in taxes.

I know that sucks.