Competency 8 Power Point

Question 1

Your client works for Beta Corp and earns $150,000. The Social Security taxable wage base for the year is $100,000. How much Social Security and Medicare tax will your client pay in the current year? A. $11,475 B. $9,300 C. $8,375 D. $6,200

Answer 1

C 100,000 (earnings cap) x .062 = 6200

150,000 (Total wages) x .0145 = 2175 = 8,375

Question 2

Coverage Credits

All the following statements concerning Social Security are correct EXCEPT

• A There are two Social Security and two Medicare trust funds
• B Earn $10,000 for the current year and you will earn four coverage credits.
• C A worker with 35 coverage credits is eligible for retirement benefits at age 62.
• D Approximately 96% of working-age Americans are covered by the Social Security system

Answer 2

C: False. The basic retirement benefit paid by Social Security is the retirement benefit paid to qualifying workers. To qualify, the worker must earn 40 coverage credits B: True. Earn a minimal amount in a year ($4,800 in 2014) and you earn four quarters of coverage

Question 3

The PIA for those who first become eligible in 2016

90 percent of the first $856 of his/her average indexed monthly earnings, plus

32 percent of his/her average indexed monthly earnings over $856 and through $5,157, plus

15 percent of his/her average indexed monthly earnings over $5,157

Answer 3

Issue to understand is that

Question 4

Social Security benefits discriminate in favor of lower paid workers

Answer 4

True

Question 5

The more affluent the lower the percentage of final salary that is replaced by Social Security.

Answer 5

True

Question 6

Single person at full retirement age earning $18,800 in 2013 receives benefit replacing 55% of income, If they earn the taxable wage base each year ($113,700 in 2013) and replace 25% of income

Answer 6

1

Question 7

Workers with fully insured status: Once they claim, then Nonworking spouses […] or older Spouse of any age if caring for child under […] Dependent, unmarried children under […] (under 20 if in secondary school) […] or older and disabled from a disability that started before age […] Family maximum may apply if 3 or more benefits apply.

Answer 7

62 16 18 18 22

Question 8

Social Security Statement Stopped sending out statements in 2011

Answer 8

True

Question 9

Restarted sending out annual statements at age 60

Answer 9

True … On 02/2012

Question 10

Now they send every five years from age 25—unless enroll for online statements

Answer 10

False : They are sent out the year the worker reaches age 25.

Question 11

Statement information On Line and Paper Full retirement age - Earnings record Benefit estimates at 62, full retirement age , and 70

Answer 11

True

Question 12

•Workers with fully insured status once they claim, then

–Nonworking spouses 62 or older

–Spouse of any age if caring for child under 16

–Dependent, unmarried children under 18 (under 20 if in secondary school)

–18 or older and disabled from a disability that started before age 22.

–Family maximum may apply if 3 or more benefits

–Unmarried divorced spouse if marriage lasted 10 years

Answer 12

• Social Security

– For 1 in 5 retirees SS is only source of income

– For 1 in 3 retirees SS is 90% of income

– For 2 in 3 retirees SS is more than 50% of income.

– Ratios not expected to change over time

– As retirees age they become more dependent

– Widows very dependent on SS

Question 13

d. Planning Point: Affluent clients need to save more themselves for retirement because Social Security provides them with a lower replacement ratio. Those earning more than the taxable earnings base receive no Social Security benefits at all for earnings over the base (although they do receive benefits on earnings up to the base).