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A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her labor earnings amounting to 20 percent. Calculate her gross and net replacement rates. Suppose the cash value of Medicare subsidies that she expects to receive during retirement amount to $2,000 per year. Recalculate the replacement rates, including the Medicare benefits.

A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her labor earnings amounting to 20 percent. Calculate her gross and net replacement rates. Suppose the cash value of Medicare subsidies that she expects to receive during retirement amount to $2,000 per year. Recalculate the replacement rates, including the Medicare benefits.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her labor earnings amounting to 20 percent. Calculate her gross and net replacement rates. Suppose the cash value of Medicare subsidies that she expects to receive during retirement amount to $2,000 per year. Recalculate the replacement rates, including the Medicare benefits.
Transcribed Image Text:A middle-income worker with a dependent spouse older than the normal retirement age retired in January 2004. In the year prior to retirement, her gross monthly earnings are $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her labor earnings amounting to 20 percent. Calculate her gross and net replacement rates. Suppose the cash value of Medicare subsidies that she expects to receive during retirement amount to $2,000 per year. Recalculate the replacement rates, including the Medicare benefits.
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