Social Security and Medicare Answers

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2
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Bob just turned 66 years old and is considering retirement. His average annual salary over the last 35 years is $50,760. Assuming that he will receive 42% of his average annual salary, what will be his annual Social Security benefit?

A
$2,131.92
B
$21,319.20
C
$213,192.00
D
$2,131,920.00
3

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $125,000. Use $106,800 for maximum taxable earnings. (Soc Sec 6.2%, taxed up to $106,800 and Medicare 1.45%).

A
Social Security tax: $77,500.00, Medicare tax: $18,125.00
B
Social Security tax: $7,750.00, Medicare tax: $1,812.50
C
Social Security tax: $66,216.00, Medicare tax: $18,125.00
D
Social Security tax: $6,621.60, Medicare tax: $1,812.50
4

Which of the following statements accurately describes the result of an increasing worker-per-beneficiary ratio in the Social Security system?

A
More taxed workers than beneficiaries means that the system is collecting more money for the money being drawn out. This leaves money in the system and secures benefits for future beneficiaries.
B
More taxed workers than beneficiaries means more money is being drawn from the system for the money put in. This leaves a shortage of money in the system making benefits for future beneficiaries insecure.
C
More taxed workers than beneficiaries means that the system is collecting more money for the money being drawn out. This leaves a shortage of money in the system making benefits for future beneficiaries insecure.
D
More taxed workers than beneficiaries means more money is being drawn from the system for the money put in.This leaves money in the system and secures benefits for future beneficiaries.
5

One possible solution to a diminishing Social Security payroll is to increase the Social Security tax by 1.89%. How would such an increase effect the tax on an annual salary of $54,000?

A
Annual tax would increase by $1,020.60.
B
Annual tax would increase by $2,327.40.
C
Annual tax would increase by $3,348.00.
D
Annual tax would increase by $4,368.60.
9

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $35,400.

A
Social Security tax: $2,194.80, Medicare tax: $513.30
B
Social Security tax: $21,948.00, Medicare tax: $5,133.00
C
Social Security tax: $6,621.60, Medicare tax: $513.30
D
Social Security tax: $66,216.00, Medicare tax: $5,133.00
12

A major concern with Social Security is the possibility that funds will not be available when today’s tax-payers retire to become beneficiaries. According to the Social Security Trustee’s report, an increase of 1.89% in the Social Security payroll tax would keep the account full for the next 75 years. To achieve similar results, benefits would have to be decreased from the current 42% of the ending salary to 29% of the salary. Cindy is relatively new to the workforce. She has 32 years until s

Answer:

1a) $45,000 * 0.062 = $2,7901b) 6.2% + 1.89% = 8.09%; $45,000 * 0.0809 = $3640.502a) $45,000 * 0.42 = $18,900 2b) 42% - 13% = 29% $45,000 * 0.029 = $13,050 3) You should probably recommend she pay the extra taxes now. If the tax were increased by 1.89%. Cindy would have to pay an extra $3640.50 - $2,790 = $850.50 per year for the 32 years before she retires. This adds up to $27,216 over the length of 32 years. On the other hand, if benefits were decreased from 42% of her salary to 29% of her salary the time of Cindy’s retirement (approximations), she would receive $18,900 - $13,050 = $5,850 less per year after she retires. This adds up to $58,500 in just 10 years.

13

Determine the total annual FICA tax for an annual salary of $110,330. Use $106,800 for maximum taxable earnings.

A
$822.14
B
$844.02
C
$8,221.39
D
$8,440.24
14

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $125,000. Use $106,800 for maximum taxable earnings. (Soc Sec 6.2%, taxed up to $106,800 and Medicare 1.45%).

A
Social Security tax: $77,500.00, Medicare tax: $18,125.00
B
Social Security tax: $7,750.00, Medicare tax: $1,812.50
C
Social Security tax: $66,216.00, Medicare tax: $18,125.00
D
Social Security tax: $6,621.60, Medicare tax: $1,812.50

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