Answered: If you retire at age 62, benefits of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Monthly Benefits

The Social Security Administration has a computerized service that determines your benefits because Social Security benefits are based on a fairly complicated formula. In fact, the government is required to provide all covered workers with a Social Security Statement.

Identify the range of benefits you can expect.

If you retire at age 62, benefits of _________ to _________% of your ____________.

If you retire at age 65 to 67, receipt of _______________________________________.

f you delay retirement until age 70, you can receive _________________in your benefits.

Range of Benefits

Tim, a 66 years old worker, is deciding between retirement either this year or the next year. His average monthly benefit is determined to be $1,635.40. Assume that the benefit is the same for this year and the next year.

Compute Tim’s annual benefit reduction amounts in each of the following scenarios.

If Tim retires this year and secures a part-time job earning $19,000, his annual benefit reduction amount is ___________________________.

If Tim retires this year, secures the same part-time job, and in addition projects interest and dividend earnings of $7,000 per year, what his annual benefit reduction amount is____________________________.

If Tim retires next year and secures the same part-time job, the annual benefit reduction amount is __________________________.

Taxes on Benefits

Social Security is paid in with after-tax dollars but may be subject to tax if annual income exceeds a base amount. A single taxpayer’s base is $25,000. Married taxpayers filing jointly have a base of $32,000. Married taxpayers filing separately have a base of zero.

Suppose Brian is retiring this year at age 67.

Part-time salary$30,500Annual savings account interest$300

Annual dividends $2,750Annual interest on Dallas municipal bonds$1,550

Based on the income calculated, Brian will have___________% of his Social Security benefits taxed.

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