Bryant - Course 5. Retirement Planning & Employee Benefits. 11. Social Security, Medicare and Medicaid

Question 1

Working people in a farming society were assumed to be self-sufficient. If disaster occurred, the remaining members of the family assumed responsibility. Few people lived long enough to retire from work, and extended families lived close enough to help one another. However, industrialization changed this agrarian pattern. Society became interdependent and relied on a monetary exchange system for transactions. Families were more likely to be separated geographically. Improved sanitation and health care increased life expectancy. The result was a potentially long retirement period, often involving economic and physical dependency.

Society was revolutionized, and so was the method of providing economic security to its members. Instead of the family, the government assumed some responsibility for providing economic security to its citizens. Each government approaches this issue differently. The American approach relies on free enterprise, with a foundation of government-provided benefits and extensive regulation, to provide the framework of the national economic security program. The government-provided benefit program is called Social Security.

Answer 1

The Social Security module, which should take approximately four hours to complete, will explain the benefits provided to an individual and his or her family through Social Security.

Upon completion of this module, you should be able to:
* Describe the concept of Social Security,
* Explain the funding of Social Security funds,
* Calculate the Social Security taxes required from a worker,
* List the eligibility qualifications for Social Security benefits,
* Specify the requirements for receiving disability benefits,
* Identify the benefits available to the family of a worker,
* State the provisions for survivor benefits upon death of a worker,
* Explain the benefits available at retirement, and
* Define Medicare and Medigap provisions.

Question 2

Module Overview

The Social Security Act of 1935 marked the federal government’s acceptance of some of the responsibility for the provision of individual economic security. Over the years since 1935, the original Social Security program has been expanded by providing new benefits, disability coverage and health insurance for the aged. The amount of benefits has also increased steadily.

Social Security is actually a social insurance program operated by the federal government. The major perils covered by the Social Security program are premature death, disability, outliving one’s income and medical expenses of the aged. These are the same perils insured by private life and health insurance companies. However, unlike private insurance, participation in Social Security is compulsory for almost all working people. Some of the people that do not participate in the Social Security system are some clergy and members of religious groups, some Americans working abroad, some persons working for close family members, persons working in a hospital, home, or institution where the person is a patient or inmate, and most full-time students at state and local schools who work for the institution in which they are enrolled. Additionally, employees covered by a Railroad Retirement and employees of the federal government hired before 1984 do not contribute to Social Security. For employees of certain state governments, Social Security is compulsory for employees hired after July 1, 1991, if they do not participate in a public retirement system. Social Security benefits are predetermined by a formula set out by the Social Security Administration.

Answer 2

Social Security affects almost everybody, regardless of whether they are young or old, male or female, single or with a family. They are either paying Social Security taxes or getting Social Security benefits or they are related to someone who is doing either of these. Apart from Social Security benefits, some additional benefits that some may be eligible to receive are Medicare (the government’s health insurance program) and Supplemental Security Income (SSI).

To ensure that you have a solid understanding of Social Security, the following lessons will be covered in this module:
* Social Security: A Simple Concept
* Social Security While You Are Working
* Social Security Benefits

Question 3

Section 1 - Social Security: A Simple Concept

Social Security is based on a simple concept. When people work, they pay taxes into the Social Security system. When people retire or become disabled, they and their spouse and dependent children receive monthly benefits that are based on their earnings. If they die, their survivors can collect benefits.

Answer 3

To ensure that you have a solid understanding of the simple concept of Social Security, the following topics will be covered in this lesson:
* More than Retirement
* Foundation
* Social Security Tax Dollars
* Contact Information

Upon completion of this lesson, you should be able to:
* Explain why Social Security benefits are not just for retirement,
* Define the role of Social Security as a foundation for a secure financial future,
* Specify how Social Security tax dollars are used to provide benefits, and
* List the resources for information regarding Social Security.

Question 4

In what circumstances would a child (under age 18 and unmarried) receive Social Security benefits? Click all that apply.
* Parent age 55 wants to receive early retirement benefits
* Parent has retired
* Parent has passed away
* Parent is disabled

Answer 4

Parent has retired
Parent has passed away
Parent is disabled
* If a parent passes away, is receiving retirement benefits, or is receiving disability benefits, a child may receive Social Security benefits, depending on their circumstances. These is a cap to the total family benefits that can be received. Regardless of when a worker wants to receive retirement benefits, a worker needs to be at least 62 years old to start receiving any retirement benefits.

Question 5

Describe Social Secuity as a Foundation

Answer 5

Social Security benefits are not intended to meet all of one’s financial needs. Even the Social Security Administration declares on their benefit statements “Social Security was not intended to be the sole source of income when you retire. You’ll also need a pension, savings or investments.” When a person retires, he or she will need other income, such as savings or a pension. Social Security can be described as a foundation upon which a person can build his or her financial future.

Plans and decisions need to be made to ensure a brighter and more secure financial future. Social Security is an important part of financial planning and helps people maintain their standard of living even after they retire.

Practitioner Advice: Some people want to plan their retirement without Social Security benefits in the calculation because of the perceived uncertainty of future benefits. This is a more conservative approach.

Question 6

Section 1 - Social Security: A Simple Concept Summary

Almost all Americans either pay Social Security taxes or are eligible to receive benefits. Therefore, part of retirement planning will be dependent upon the Social Security system. For many senior citizens, Social Security is their primary source of retirement income. However, Social Security provides more than just that.

In this lesson, we have covered the following:
* Social Security is more than retirement because when persons pay mandatory Social Security taxes, they are provided with insurance that provides for them and their family, not only at retirement, but also in the event of health problems, disability or death.
* Social Security is a foundation for a secure financial future. The benefits paid by Social Security are not intended to provide a life of comfort after retirement because it may not meet all the financial needs of a person. It is intended to provide a base level of protections that should be supplemented by other retirement income in order to maintain the required standard of living after retirement.

Answer 6

• Social Security tax goes into trust funds that pay benefits. Both employee and employer pay 6.2% of earnings to social security up to the taxable wage base. Out of each tax dollar, 85 cents is used to pay benefits to retirees and their families and 15 cents is used to pay benefits to the disabled and their families. In addition to this, 1.45% of earnings are paid in taxes for Medicare by both employee and employer.
• Contact information provided by the Social Security Administration are the toll-free number 1-800-772-1213 and for the hearing impaired 1-800-325-0778. There are also several online resources such as publications, forms, newsletters, planners and applications at their website www.ssa.gov.

Question 7

Section 2 - Social Security While You Are Working

The objective of the Social Security system is to provide universal coverage for all workers. The Social Security Administration has set out rules that govern eligibility and benefits received. Most people who work pay Social Security taxes in different amounts and accumulate credits that will eventually qualify them for benefits. The amount of benefits paid is based on the amount of earnings on which Social Security taxes have been paid.

To ensure that you have a solid understanding of the provisions of Social Security while an individual is working, the following topics will be covered in this lesson:
* Social Security Number
* Earning Credits
* Taxes You Pay
* How Much Will You Get?

Answer 7

Upon completion of this lesson, you should be able to:
* State the uses of the Social Security number,
* Define the criteria for qualifying for Social Security benefits,
* Explain the system for earning Social Security credits,
* Describe the method for calculating Social Security and Medicare taxes, and
* Determine the basis on which benefits are received.

Question 8

Describe earning Social Secuirty Credits

Answer 8

To get benefits from Social Security, an individual must work and pay taxes into Social Security. However, some people get benefits as dependents or survivors on another person’s Social Security record.

Those who pay taxes will earn Social Security credits. In 2023, a person earns one credit for each $1,640 in earnings up to a maximum of four credits per year. The amount of money needed to earn one credit goes up every year. For example, Bob earned $7,000 in the year 2023 while working only in February. Bob would be credited with 4 credits of coverage for the year.

Most workers need 40 credits, essentially 10 years of work, to qualify for benefits. Earning 40 credits qualifies a worker as being “fully insured.” Forty credits are needed to qualify for retirement benefits. Younger people need fewer credits to be eligible for disability benefits or for family members to be eligible for survivor benefits if the worker dies.

During someone’s working lifetime, they probably will earn more credits than they need to be eligible for Social Security. These extra credits do not increase their eventual Social Security benefit. However, the income they earn may increase their benefit.

Practitioner Advice: In the past, the Social Security System used “quarters” to determine eligibility for benefits. However, this term has been replaced by “credits”. In your studies, the older term quarters and the newer term credits as synonymous.

Question 9

It is the employer’s sole responsibility to keep the employee’s record of earnings correct with the Social Security Administration. State True or False.
* False
* True

Answer 9

False
* The employee shares with the employer for making sure that all the earnings have been reported and they are accurate. The accuracy is important because the employee’s benefits will be based on this record of lifetime earnings.

Question 10

Section 2 - Social Security While You Are Working Summary

The government gets the money to pay Social Security benefits from the tax on the earnings of workers. Whether people want to or not, they fund Social Security during their working years by paying taxes directly to the Social Security system. Thereby, over the years most become eligible for Social Security benefits. This applies to both those who are self-employed and those working for someone else.

In this lesson, we have covered the following:
* A Social Security number is required for getting a job, paying taxes, and receiving Social security benefits. Unauthorized persons cannot use the number to access anyone’s records. A Social Security number can be obtained by submitting an application along with certain legal documents.
* Credits must be earned to become eligible for Social Security. To earn credits, a person has to work and pay money in the form of Social Security taxes. A person can earn a maximum of four credits per year. To qualify for most Social Security benefits, a total of 40 credits, or 10 years of work, are required. Earning beyond 40 credits will not increase the benefits.

Answer 10

• Taxes paid are 15.3% of earnings up to the taxable wage base of $160,200 (2023). After the taxable wage base is reached, 2.9% of earnings is paid toward Medicare. Those employed by someone else pay half the amount while the employer contributes the other half. In addition, an additional 0.9% Medicare Surtax is charged on earned income over $200k for single tax filers and $250k for married filing jointly.
• The amount of benefits a person will receive is determined by age, type of benefit applied for, lifetime earnings, and adjustment for inflation. The Social Security Statement provided by the government each year displays the earnings record and provides estimates of the retirement, disability, and survivor benefits to which a person is eligible.

Question 11

A Social Security number is a mandatory requirement for which of the following? (Select all that apply)
* Getting a job
* Filing tax returns
* Getting an airline ticket
* Obtaining a credit card
* Receiving Social Security benefits

Answer 11

Getting a job
Filing tax returns
Receiving Social Security benefits
* Employers, financial institutions that pay interest and the Internal Revenue Service (IRS) require that an individual present his or her Social Security number. It is not possible to pay into the Social Security program and to collect Social Security benefits without a Social Security number. Many other businesses and government agencies also use the Social Security number for recordkeeping purposes.

Question 12

Jenny needs 40 credits to qualify for benefits of Social Security. Her annual income is $80,000. Pick out the statements that are true regarding Jenny’s credits in 2023. (Select all that apply)
* Jenny will get one credit for each $1,640 she earns not to exceed 4 quarters during a calendar year.
* She can earn a total of 49 credits this year ($80,000 / $1,640 = 48.78).
* Jenny will have to work for at least 10 years to earn the required 40 credits.
* The excess credits that she earns will increase her Social Security benefits.
* Increased income will increase her Social Security benefits up to a maximum.

Answer 12

Jenny will get one credit for each $1,640 she earns not to exceed 4 quarters during a calendar year.
Jenny will have to work for at least 10 years to earn the required 40 credits.
Increased income will increase her Social Security benefits up to a maximum.
* As Jenny works and pay taxes, she earns Social Security credits. In the year 2023, she will earn one credit of each $1,640 of earnings. However, Jenny must work for at least 10 years to qualify for benefits because she can get only a maximum of four credits per year. Although her income is higher, it will not increase her eventual Social Security benefits. The amount of income she earns will increase her benefits up to just the maximum credits available.

Question 13

In a normal year, William Fitzgerald works for Jeremiah Hansen as an accountant. His annual gross salary is $80,000. What is the total percentage of Fitzgerald’s gross salary that must be paid as tax to Social Security and Medicare?
* 1.45%
* 2.9%
* 6.2%
* 7.65%
* 15.3%

Answer 13

15.3%
* In a normal year, the employee and the employer each must pay 7.65% of the employee’s gross salary (6.2% for Social Security and 1.45% for Medicare), up to $142,800.
* Therefore the total contribution made is equal to 15.3% of Fitzgerald’s gross salary.

Question 14

Michael is self-employed and earns $40,000 in a normal year. How much would Michael normally pay in Social Security taxes?
* $2,480
* $3,060
* $6,120
* $5,652

Answer 14

$5,652
* Although Michael must pay the full FICA of 15.3%, he will receive a deduction for the employer portion. This is calculated by multiplying his income $40,000 by .9235 which results in $36,940 which is then multiplied by 15.3% to arrive at the FICA amount of $5,652 (rounded up to the nearest dollar).

Question 15

Steve retired at 55 and his only source of income is from his investment portfolio. Steve’s portfolio produced $40,000 of interest and capital gains. How many credits of coverage did Steve earn toward Social Security?
* 1
* 4
* 3
* 0

Answer 15

0
* Investment earnings are not subject to Social Security tax and do not receive credits.
* Only earned income subject to Social Security taxes receives Social Security credits.

Question 16

Section 3 - Social Security Benefits

Social Security is a mandatory insurance program that provides benefits when required. Social Security also provides disability and survivor benefits as well as a certain degree of health insurance in the form of Medicare. The worker’s family members may also get certain benefits based on the individual’s eligibility.

To ensure that you have a solid understanding of Social Security benefits, the following topics will be covered in this lesson:
* Disability Benefits
* Benefits for Your Family
* Survivor Benefits
* Retirement Benefits
* Medicare Benefits
* Medigaps

Answer 16

Upon completion of this lesson, you should be able to:
* Define disability as specified by the Social Security Administration,
* List the eligibility requirements for disability benefits,
* List the benefits available to family members of the worker,
* Describe the survivor benefits provided when a worker dies,
* State the full retirement benefits,
* Explain the reduced benefit arrangements,
* Identify the other options for retirement,
* Identify the four parts of Medicare coverage, the benefits provided by each, common out-of-pocket costs required for insured individuals, and alternative insurance options to cover the gaps associated with Medicare.
* Assist a client in selecting proper Medicare coverage and any supplemental coverage with careful attention to appropriate deadlines.

Question 17

What is Social Security’s definition of disability?

Answer 17

The dictionary defines disability as “a physical or mental condition that prevents a person from leading a normal life.” Social Security’s definition of disability is more specific. The Social Security definition of disability is defined as a condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death.” Disability under Social Security is based on an individual’s inability to work in any occupation.

This is a strict definition of disability. Unlike many private pension plans or even some other government disability programs, Social Security is not intended for a short-term condition. There is no such thing as partial disability benefits from Social Security.

Practitioner Advice: Many financial planners do not include Social Security disability when doing a financial plan because of the strict definition of disability. This means that it is difficult for someone to meet the Social Security definition of disability. It is not a good idea to rely just on Social Security for disability coverage for the following reasons:
* Very hard to qualify (strict definition)
* Usually will not provide enough of a benefit

Question 18

To motivate individuals with a disabling condition to go back to work, Social Security will continue to pay a partial benefit to the individual for an extended period of time. State True or False.
* False
* True

Answer 18

False
* Social work incentives provided by Social Security allow disabled persons to work for a period of time without reducing their benefits.

Question 19

Who Can Receive SS Survivor Benefits?

Answer 19

When a worker dies, certain members of his or her family may be eligible for benefits on the worker’s Social Security record if he or she earned enough credits while working. Family members who can collect benefits include:
* A widow or widower who is 60 or older,
* A widow or widower who is 50 or older and disabled,
* A widow or widower at any age if she or he is caring for a child under age 16 or a disabled child who is receiving Social Security benefits,
* Children if they are unmarried and
* Under age 18,
* Under age 19 but in an elementary or secondary school as a full-time student, or
* Age 18 or older and severely disabled and the disability had started before age 22, and
* Parents, if they were dependent on the worker for at least half of their support.

Practitioner Advice: Most people do not realize that a dependent parent is entitled to benefits based on the earning record of the one whom they are dependent on. If a parent is living with a child, it makes sense to see if the parent satisfies the test to be considered a dependent. This may be a very valuable planning opportunity. For instance, if a parent were truly dependent on a child and the child died, the survivorship benefit would help the parent.

Question 20

Describe SS Reduced Benefits

Answer 20

The earliest a fully insured worker may claim Social Security retirement benefits is age 62. However, receiving benefits early will result in reduced benefits. If 65 is the full retirement age, they are reduced five-ninths of 1% for each month before the worker’s full retirement age.

More specifically, benefits are reduced 5/9 of 1% for each month of early retirement, up to a maximum of 36 months. A further reduction applies for each month over 36 months at the rate of 5/12 of 1% per month to a maximum of an additional 24 months. For the first 3 years, therefore, the annual retirement benefits will be reduced by 20% (5/9 x 36). For the fourth year, the reduction will be 5/12 x 12 = 5%. The total reduction for retiring four years early would be 25%.

For example, assume Randall Holley’s full retirement age is 65 and he signs up for Social Security at age 64. He will receive 93% of his full benefit. If he chooses to start receiving benefits at age 62, he would get 80%.

A person born in 1960 whose full retirement age will be 67 will see a 30% reduction when retiring at age 62.

There are disadvantages and advantages to taking Social Security benefits before reaching full retirement age. The disadvantage is that the benefit is permanently reduced. The advantage is that benefits can be collected for a longer period of time. Each person’s situation is different, so it would be helpful to contact Social Security before a person decides to start receiving benefits.

Exam Tip: Although Social Security retirement benefits that are accessed early will be reduced in relation to one’s primary insurance amount (PIA) at full retirement age (FRA), the reduced benefit will adjust annually with a cost of living adjustment (COLA). This allows the benefit to keep pace with inflation as measured by the Consumer Price Index (CPI).

Question 21

Special credit is given to workers who delay retirement beyond their full retirement age. For workers reaching full retirement age in 2023, the delayed credit rate is 8% per year up to age 70.
* False
* True

Answer 21

True
* For people reaching full retirement age in 2022. The rate is 8% per year.

Question 22

Section 3 - Social Security Benefits Summary

Once a person has met the requirement for credits, he or she becomes eligible for retirement, disability and survivor benefits. Family members of the individual may also qualify for certain benefits. Other benefits available are Medicare from the government that can be supplemented by Medigaps from private insurance companies or Health Maintenance Organizations.

In this lesson, we have covered the following:
* Disability benefits provide protection for those who experience a physical or mental impairment that is expected to result in death or keep them from doing any substantial work for at least a year. Only those who satisfy the Social Security Administration’s stringent requirements may receive disability benefits. To avail of these benefits a person must provide certain required medical and vocational information. He or she will start receiving benefits from the sixth full month of disability. Those who wish to work despite their disabling condition are eligible to receive certain incentives.
* Benefits for the family are payable to family members when a worker is eligible for retirement or disability benefits. Family members may include spouses, ex-spouses and children. Each family member may be eligible for a monthly benefit that is up to 50% of the worker’s benefit amount. The maximum benefits that can be paid to one family are about 150% to 180% of a worker’s retirement benefit. If the family member is entitled to a benefit due to his or her own covered employment, he or she may take the larger of the two benefits, but not both.

Answer 22

• Survivor Benefits are the benefits that are payable to the family of a worker who dies. These payments include a small automatic one-time payment at the time of death, as well as continued monthly payments to the spouse and/or children if they meet the requirements. Parents of a worker may also qualify for survivor benefits if they were dependent on the worker for at least half of their support and satisfy some additional criteria.
• Retirement benefits are monthly payments received from Social Security during the recipient’s lifetime. A full retirement benefit is available at normal retirement age, which is currently age 65. When a worker retires between the ages of 62 and 65, a reduced retirement benefit is available. Those who wish to work full-time beyond their retirement age without receiving Social Security benefits get a special credit that can increase their eventual Social Security benefits. Those continuing to work can also receive full retirement benefits if they choose to do so. A person who has a substantial income in addition to Social Security benefits may have to pay taxes on the benefits.
• Medicare is a health insurance program for those age 65 years and above and for some with disabilities under 65 years of age. Medicare has two parts. Part A is hospital insurance that helps to pay for care in a hospital and certain follow-up services. Part B is medical insurance that helps to pay for doctors, outpatient hospital care and some other medical services that Part A does not cover. While participation in Part A is compulsory and there is no monthly cost to insureds, participation in Part B is voluntary and insureds must pay a monthly premium.
• Medigap Insurance is sold by private insurance companies. Medicare does not cover all aspects of medical and health insurance. Medigap bridges this gap in coverage. There are 10 standard Medigap plans from which to choose. Depending on the type of plan selected, the coverage may include coinsurance, deductibles, travel emergency, at-home recovery, preventive care and prescription drugs.

Question 23

Social Security’s definition of disability is very specific. What are all the requirements that a person must meet to be considered as disabled by the Social Security Administration? (Select all that apply)
* The person cannot perform any substantial work. The impairment must be expected to last at least 12 months or result in death.
* The disability prevents a person from leading a normal life.
* The disability is expected to last for at least six months.
* The disability is expected to result in death.

Answer 23

The person cannot perform any substantial work. The impairment must be expected to last at least 12 months or result in death.
The disability is expected to result in death.
* Persons are considered disabled if they cannot do the work they did before. The Social Security administration must then decide that the disabled cannot adjust to other work because of their medical condition(s). Moreover, the disability must last or be expected to last for at least a year or to result in death. In contrast the dictionary defines disability as a physical or mental condition that prevents a person from leading a normal life, which is not specific and therefore can be debated from person to person.

Question 24

Hans, age 65, has just retired and started collecting his Social Security retirement benefits. His wife, Martha, is 57 years of age and has stayed at home raising their children while Hans was the breadwinner. They have four children who are living with them at present. Andrew, age 21, is studying in college. Peter, age 19, met with an accident and is severely disabled. Sandra, age 18½, has dropped out of school while Karen, age 14, is going to school. Which of the members in Hans’s family are not eligible to receive Social Security benefits based on his record? (Select all that apply)
* Martha
* Andrew
* Peter
* Sandra
* Karen

Answer 24

Andrew
Sandra
* Martha is under age 62 but she can receive benefits because she is caring for Karen who is under age 16.
* Peter is disabled and above 19, so he can also receive benefits.
* Karen is under age 18 and is eligible for benefits.
* Andrew is not eligible by any of these rules.
* Sandra is also not eligible, because although she is under 19, she is not studying full-time in any school.

Question 25

What is the earliest age that a person can collect his or her own retirement benefits?
* 50 years
* 60 years
* 62 years
* 65 years
* 67 years

Answer 25

62 years
* Age 62 is the earliest a person can collect Social Security retirement benefits. Those who are already receiving widow’s or widower’s benefits, including divorced widows or widowers, can switch to their own retirement benefits as early as age 62.

Question 26

Only those people who paid into Medicare are eligible to secure Medicare Part A.
* False
* True

Answer 26

False
* Even if a person has not paid into the system, a person can enroll in Medicare Part A by paying the required premium.

Question 27

Lesson 11. Social Security, Medicare and Medicaid

EXAM Lesson 11. Social Security, Medicare and Medicaid

Course 5. Retirement Planning

Question 28

The waiting period that must be satisfied for Social Security disability benefits is __ ____??____ __.
* 5 months
* 3 months
* 6 months
* 4 months

Answer 28

5 months
* The waiting period must be 5 full months of disability with benefits payable in the sixth full month of a person’s disability.

Question 29

Elsa was born in 1961 and is fully insured under Social Security. She plans on retiring and claiming her Social Security retirement benefit at age 62. What percentage of her primary insurance amount (PIA) will Elsa receive?
* 100%
* 80%
* 75%
* 70%

Answer 29

70%
* Born in 1961, Elsa’s full retirement age under Social Security is 67. Claiming Social Security retirement benefits at age 62 will result in a reduction of her benefit of 30%. She is retiring 60 months prior to her full retirement age.
* The reduction is calculated as follows:
* (5/9ths of 1% x 36 months = 20%) + (5/12ths of 1% x 24 months = 10%) = 30%

Question 30

This year, Tim earned $10,000 in January but did not have earned income subject to Social Security taxes the balance of the year. How many Social Security credits does Tim earn this year?
* 7
* 1
* 3
* 4

Answer 30

4
* Tim earns the maximum of 4 credits this year.
* One credit is earned in 2023 for each $1,640 of compensation subject to Social Security taxes up to a maximum of 4 for the year.

Question 31

Elsa was born in 1961 and is fully insured under Social Security. She plans on retiring and claiming her Social Security retirement benefit at age 70. What percentage of her primary insurance amount (PIA) will Elsa receive?
* 100%
* 140%
* 124%
* 108%

Answer 31

124%
* Born in 1961, Elsa’s full retirement age under Social Security is 67. Claiming Social Security retirement benefits at age 70 will result in an increase of her benefit of 24%. Delaying Social Security retirement benefits beyond one’s full retirement age increases the benefit by 8% per year.

Question 32

What percentage of compensation does an employee pay up to the wage base limit to fund Social Security Benefits (i.e., retirement, disability, survivors)?
* 5.7%
* 6.2%
* 7.65%
* 1.45%

Answer 32

6.2%
* 6.2% of an employee’s compensation up to the wage base limit funds Social Security retirement, disability, and survivor benefits. 1.45% on unlimited compensation funds Medicare.

Question 33

The Social Security definition of disability is defined as __ ____??____ __.
* A condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death.
* A condition under which the individual is unable to engage in their regular occupation by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death.
* A condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 5 months.
* A condition under which the individual is unable to engage in their regular occupation by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 6 months.

Answer 33

A condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death.
* The Social Security definition of disability is very specific and more restrictive than definitions of disability found in private disability insurance policies.

Question 34

In 2023, Kristi earned $100,000 as a self-employed photographer. How much must she pay in self-employment tax for the year?
* $15,300
* $7,065
* $7,650
* $14,130

Answer 34

$14,130
* Kristi will pay $14,130 in SE tax for 2023.
100,000 x 0.9235 = 92,350
92,350 x 0.153 = 14,130

Question 35

How many Social Security credits must a worker earn to be eligible for retirement benefits?
* 4
* 62
* 10
* 40

Answer 35

40
* A covered worker needs 40 credits to qualify for Social Security retirement benefits.

Question 36

Elsa was born in 1961 and is fully insured under Social Security. She plans on retiring from full-time employment and claiming her Social Security retirement benefit at age 62. Her current full retirement primary insurance amount (PIA) is projected to be $2,000 per month. If Elsa works part-time until age 67 and earns $2,000 per month, what is the benefit withholding formula that would apply due to her earnings in the year she attains age 65?
* $1 will be withheld for every $2 her earned income exceeds $21,240 (2023).
* No reduction would apply.
* 100% of her benefit will be withheld.
* $1 will be withheld for every $3 her earned income exceeds $56,520 (2023).

Answer 36

$1 will be withheld for every $2 her earned income exceeds $21,240 (2023).
* Born in 1961, Elsa’s full retirement age under Social Security is 67. Claiming Social Security retirement benefits at age 62 and continuing to have earned income would result in benefits being withheld of $1 will be withheld for every $2 her earned income exceeds $21,240 (2023).

Question 37

Juan, age 40, died recently in a car accident, leaving his spouse and three minor children. He was fully insured under Social Security. What amount will his family receive as a one-time lump-sum death benefit?
* $1,020
* $510
* $255
* $765

Answer 37

$255
* Social Security provides a one-time lump-sum death benefit of $255. The death benefit is not per beneficiary.