You know what they say about death and taxes - even if you're on Social Security

Q. I am 73, on Social Security, and working part time. Am I required to have payroll taxes deducted from my paychecks?
O.N., San Antonio
A. Yes, the payroll tax, often called the employment tax, will be automatically deducted. Also, while you are old enough that your Social Security benefits cannot be reduced because of work earnings, it is possible that your additional earnings will cause a portion of your Social Security benefits to be taxed.

Let's take a modest case. Suppose your wage earnings cause a portion of your Social Security benefits to be taxed and that you are in the 15 percent tax bracket. Then, each additional dollar of earnings will pay this much in taxes: 7.65 percent for your half of the employment tax, 15 percent for the federal income tax on that dollar of wages, and 7.5 percent for the taxes due on the 50 cents of Social Security benefits that become taxable.

As a result, your marginal tax rate on each additional dollar of wages will be 30.15 percent, excluding any state income taxes. Exceed certain amounts and it could be still higher.

If you were self-employed, you would pay an additional 7.65 percent (the employers' responsibility), and your effective tax rate on additional income would be 37.8 percent.

This can happen to a single, retired taxpayer with total income, from all sources, of less than $50,000. A person who is not retired would have to earn more than three times that much to pay taxes at a similar rate.

Q. I am in the position of being totally dependent on the federal government for my financial position. As a retired federal employee, I receive a monthly annuity and a little Social Security from work before and after my federal employment. I also have a few hundred thousand in savings, but nothing in the stock market. I have IRAs in the amount of about $225,000, which is insured by NCUA, and CDs for about $200,000, also insured by NCUA.

You have said, "In this environment, the only 'safe' place for your money is in US Treasury obligations." Are you saying NCUA insurance is not "safe" and that I should pull it out and invest in US Treasury obligations? I understand that if the problems get serious enough, my annuity and Social Security may be reduced, but what about my CDs and IRAs?
D.D., San Antonio
A. Treasury obligations, FDIC-insured CDs, and National Credit Union Association accounts all share one thing: a guarantee from the US government.

I believe the same is true for your Social Security benefits and federal pension benefits. Failure to make good on those promises, which account for the bulk of the income received by more than half of all retirees, would be an "end-of-the-world" event.

The major threat to your security, I believe, is from future inflation, which is why I recommend Treasury inflation-protected securities and I Savings bonds.

Scott Burns is a syndicated columnist. He can be reached at scott@scottburns.com.