Module 7 Retirement Planning

Carla is collecting $600 per month from a government pension and is also eligible to receive a Social Security spousal benefit of $500 per month. Due to the Government Pension Offset (GPO), her Social Security spousal benefit will be reduced to

$100

In 2022, Ellen has reportable wages of $150,000. How much is subject to the payroll tax for Medicare funding?

$150,000

In the current year, Julie has a $30,000 adjusted gross income (AGI), $1,000 in municipal bond income, and a Social Security benefit of $15,000. What is her provisional income?

$38,500

Michael, a 62-year-old single man, is considering beginning his Social Security benefits to supplement his income of $14,000 per year. How much will he lose in Social Security benefits due to the earned income restrictions?

0

Bertha is single and her only source of income is her $1,300 monthly Social Security check. How much of her Social Security benefit will be taxable?

0%

Tammy doesn't begin her Social Security benefit at FRA (age 67), instead opting to delay while collecting delayed retirement credits. When she reaches age 69, however, she encounters financial difficulty and must file for her benefits. How much will her payment have increased?

16%

The never-employed spouse of a Social Security recipient is entitled to what percentage of the recipient's primary insurance amount (PIA) while the recipient is alive?

50%

What is the maximum Social Security pension offset amount for a worker subject to the windfall elimination provision (WEP)?

50%

A reduced Social Security retirement benefit is available for all retirees as early as which age?

62

Spousal retirement benefits can be claimed as early as age

62

Jerry was born in 1965. What age does Social Security consider to be his full retirement age (FRA)?

67

Max had net self-employment income of $100,000 from his auto repair business. What percentage is the deductible employer share of his self-employment taxes?

7.65%

Gary was born in 1960. His plan is to start Social Security retirement benefits when he reaches his full retirement age (FRA). His wife, Lisa, is exactly four years younger. She has earned 36 credits so far and has retired to take care of Gary's mother, who requires an abundance of assistance. She has no plans to return to the labor force. Their plan is for her to start receiving Social Security benefits when Gary files for his benefits. If Gary's full benefit is $2,000, what will Lisa's spousal retirement benefit be?

700

For a worker whose full retirement age (FRA) is 66 or later, the annual delayed retirement credit percentage for the years the worker delays receipt of benefits beyond (FRA) is

8%.

Andrew and Elizabeth are receiving $28,000 in Social Security retirement benefits. Their adjusted gross income (AGI) is $32,000, and they earned $3,000 in tax-free muni bond interest. What amount, if any, of their Social Security is taxable?

85%

If provisional income exceeds the thresholds given, then a maximum of ___________ of Social Security benefits are subject to taxation.

85%

Stanley received $55,000 in taxable pension plan and IRA benefits. His adjusted gross income (AGI) is $60,000 before considering his Social Security benefits. His Social Security benefit is $25,000 annually. What percentage of his Social Security benefit will be taxable?

85%

Which of the following individuals would NOT qualify to receive Social Security retirement benefits in the current year?

A never-before-employed spouse, age 40, married to a covered worker

Which of the following statements is correct regarding an ex-spouse receiving Social Security benefits?

An unmarried former spouse of a worker is eligible for Social Security benefits based on the worker's Social Security benefits if their marriage lasted at least 10 years and both of the former spouses are at least age 62.

Which one of the following is a CORRECT statement about the amount of Social Security retirement benefits available when a fully insured worker's retirement benefit begins at full retirement age (FRA)?

At FRA, the worker's spouse will receive 50% of the worker's primary insurance amount (PIA).

Which one of the following is a correct statement about the amount of Social Security retirement benefits available when a fully insured worker's retirement benefit begins at her full retirement age (FRA)?

At his FRA, the worker's spouse will receive 50% of the worker's primary insurance amount (PIA).

Beulah Tibbs, age 57, has been receiving Social Security disability benefits for three years. Which one of the following is a correct statement regarding her eligibility for Medicare?

Beulah is currently eligible for Part A and Part B Medicare coverage

Which of the following workers must have Social Security and Medicare taxes withheld from their earnings? A household worker, unrelated to the employer and age 25, who is paid $10,000 An agricultural worker who paid in excess of a specified threshold

Both I and II

Which of the following statements is correct regarding Social Security survivor benefits?

Children of a deceased worker may be eligible for Social Security survivor benefits if the worker was either fully or currently insured.

Social Security benefits are increased annually based on increases in the cost of living. This is called

Cola

Which of the following correctly describes the Government Pension Offset that applies to a spouse receiving a Social Security spousal benefit while their spouse is receiving a government pension?

Dollar-for-dollar reduction on up to two-thirds of the Social Security spousal benefit

Anne is 38 and has three children, ages 7, 11, and 14. Since her husband's death four years ago, she has been receiving Social Security survivor benefits of $1,972 per month. Anne receives no other income and has not been employed, though she may seek employment in two years. To what extent, if any, are her Social Security benefits taxable?

Her Social Security benefits are not taxable.

Amy, age 63 and single, expects to earn $22,000 from her job at the flower shop. She is also receiving Social Security benefits. What impact will these earnings have on her Social Security benefits?

Her benefit will be reduced because her earned income is in excess of the threshold and she is under full retirement age.

Which one of the following statements is NOT correct regarding Social Security income replacement ratios?

Higher earners can expect that Social Security will replace about 50% of their earnings, while those with lower earnings will only see about a 25% replacement

Which of the following correctly describe the earnings limitation on Social Security benefits? Retirement or survivor benefits may be reduced $1 for every $2 earned over the specified limit by recipients who are age 62 through the year just prior to the year they attain full retirement age (FRA). Retirement or survivor benefits may be reduced $1 for every $3 earned over the specified limit by recipients who are at FRA. Recipients who have attained their FRA may earn any amount without any reduction in their Social Security benefits. One-half of unearned (investment) income may be considered in the reduction of Social Security benefits.

I and III

Which of the following individuals would be eligible for Social Security retirement benefits? Assume each has held the same position for 11 years. a 65-year-old owner-employee of a professional corporation a 60-year-old officer-employee of an S corporation a 65-year-old federal government employee who was hired in 1983 a 67-year-old self-employed consultant who works as an independent contractor

I and IV

Which of these individuals would be immediately eligible for Social Security retirement benefits? Assume each has held the same position for at least 10 years. A 66-year-old owner/employee of a professional corporation A 60-year-old officer/employee of an S corporation A 67-year-old federal government employee who was hired in 1983 A 67-year-old self-employed consultant who works as an independent contractor

I and IV

Which of the following is(are) CORRECT regarding the Government Pension Offset (GPO) provision related to Social Security benefits? The GPO may apply to Social Security benefits for spouses, widows, or widowers if a worker receives a pension from a federal, state, or local government based on compensation on which Social Security taxes were not paid. If applicable, the GPO provision reduces the spouse, widow, or widower's benefit by 50% of the government pension.

I only

Which of the following groups are covered by the Social Security program? Self-employed persons Employees of private, for-profit businesses All state and local government employees Members of the armed services

I, II and IV

Which of the following groups is(are) NOT covered under Social Security? Approximately 25% of state and local government workers Railroad workers covered under the federal Railroad Retirement Act Workers covered under the Civil Service Retirement System

I, II, and III

Nathan Maxwell, formerly a vice president at his company, received his first annual $80,000 payment from his employer's retirement program when he retired on January 1 of this year. He also started receiving his Social Security benefit when he reached his full retirement age (FRA) this year. He worked for the same company for his entire 40-year career, accumulating 160 quarters of coverage under Old Age, Survivors, and Disability Insurance (OASDI) rules. Which of the following statements describe his eligibility for OASDI benefits? He is eligible for reduced Social Security retirement benefits because of his income this year. He is eligible for the Basic Hospital Insurance Benefits Plan of Medicare because he is at least age 65 and has accumulated enough quarters of coverage for fully insured status. He is eligible for a full, unreduced Social Security retirement benefit due to his age and insured status. He is not eligible for the Basic Hospital Insurance Benefits Plan of Medicare this year because of his income level.

II and III only

Which of the following workers are covered by Social Security? Railroad employees with more than 10 years of service Persons who are in the military Self-employed individuals Domestic employees

II, III, and IV

John will reach his full retirement age (FRA) on November 1st of this year. He is employed part-time at SummerFun Products Inc., where he has worked for the past 22 years. He began receiving his Social Security retirement benefit last year and plans to continue working. He and his wife, Angie, 55, own stock and mutual fund investments that generate annual investment income of approximately $8,000. Angie has worked for the Midwestern Railroad Company for 30 years and will be eligible for benefits of approximately $900 per month from her retirement program. John's Social Security retirement benefits are forecast to be $1,440 per month. John and Angie have three children, all of whom are independent and in good health. John is concerned about his Social Security, and he is not sure if his plan to continue working is a wise decision. How will his Social Security be affected by his earned income assuming he earns $2,000 per month?

III and IV

Bill Jones, age 35, comes to see you because he has just been diagnosed with a terminal illness. His doctor told him he will not be able to work more than another 6 months and that his life expectancy is only 12-18 months. Bill also tells you that he has always been self-employed and, with the exception of the last two years, has never paid into Social Security. What benefits will be available to Bill and his family from Social Security as a result of his disability? Medicare Part A Monthly disability benefit Lump-sum disability benefit No benefits

IV only

Bob and Helen Jones just won the lottery. The benefit this year will be $50,000, and it will increase over the next 19 years. Bob's monthly Social Security benefit is $1,800; Helen's monthly Social Security benefit is $1,200. Bob is age 68, and Helen is age 69. Which one of the following is a correct statement about Bob and Helen's old-age Social Security benefits?

If they file jointly, up to 85% of their Social Security benefit must be included in gross income.

Tyrese will turn 67, his full retirement age (FRA), on August 2nd of this year and begin drawing $1,475 per month in Social Security benefits. He earns $5,000 per month and plans to continue working as long as he is able. He has asked his advisor about the reduction in Social Security since his older brother told him his benefit will be reduced if he continues working. Does a benefit reduction apply to him? If so, how does it apply?

No. There is no benefit reduction for those who continue to work after attaining full retirement age (FRA).

Which one of the following is a correct statement about old-age Social Security benefits?

Old-age Social Security benefits are not reduced for people who have attained their Social Security full retirement age (FRA) regardless of the amount of earned income received.

Which one of the following statements correctly describes the Social Security primary insurance amount (PIA)?

PIA is derived from a retiree's average indexed monthly earnings (AIME

Sandy Rigby is 29 years old. After college, Sandy worked for four years as a dental assistant. She then returned to college for four years to earn a graduate degree. For the past year, she has worked as a management trainee at a large computer company. Which one of the following correctly describes Sandy's status with respect to Social Security benefits?

She is fully insured but not currently insured.

John will reach his full retirement age (FRA) on November 1st of this year. He is employed part-time at SummerFun Products Inc., where he has worked for the past 22 years. He began receiving his Social Security retirement benefit on January 1st this year and plans to continue working. He and his wife, Angie, 55, own stock and mutual fund investments that generate annual investment income of approximately $8,000. Angie has worked for the Midwestern Railroad Company for 30 years and will be eligible for benefits of approximately $900 per month from her retirement program. John's Social Security retirement benefits are forecast to be $1,440 per month. John and Angie have three children, all of whom are independent adults and in good health. Assume that John dies this year. Which of the following statements describe Angie's current eligibility for benefits from the Social Security system?

She is only eligible for the lump-sum death benefit of $255.

Gina retired last year at age 62. This year she will receive $21,000 for consulting work, in addition to her pension of $38,000 and investment earnings of $8,700. Which of the statements below are accurate regarding how her earnings will affect her Social Security benefit?

She will lose $1 of Social Security benefits for each $2 that the $21,000 earned income exceeds the exempt amount

Betty has worked for the same retail store for 23 years. She is approaching age 62 and is considering retiring and starting her Social Security benefit, although her full retirement age is 66. Before she does so, however, she wants to know when she will qualify for Medicare. Which of the following statements would be correct?

She will not qualify for Medicare until she reaches age 65.

How are Social Security benefits funded?

Special taxes are collected from workers and used to pay benefits to those workers who are retired.

This year, your 63-year-old client had $14,000 of earned income and $30,000 of investment income. He was also drawing Social Security benefits. Which one of the following correctly describes the impact on his Social Security benefits?

There is no reduction to his benefits

Henry and his wife, Etta, will both reach their full retirement age (FRA) this month, and they both plan to begin receiving Social Security benefits next month. Etta's primary insurance amount (PIA) is $1,900; Henry's PIA is $975. What will their maximum Social Security benefit be?

They will both receive their respective PIAs.

Ann has reached her full retirement age (FRA). She can elect to receive $1,000 now or delay receipt by two years. She expects to live until age 90. Ignoring outside factors, when should she begin her benefits to receive the highest amount?

Two years from now

Glenn opened his consulting firm 40 years ago at age 26. After working as a sole proprietor for his entire career, Glenn sold his firm to a professional corporation and retired this year. He will receive five annual payments of $50,000 each from the sale of the business. His Social Security full retirement age (FRA) is 66. Is Glenn eligible for Social Security retirement benefits this year, and why or why not?

Yes, because he is a fully insured professional and meets the age requirement to receive retirement payments

Which one of these individuals will be eligible for Medicare coverage?

a 68-year-old farmer

George Adams, a single recipient of Social Security benefits, is calculating the taxability of his $8,940 Social Security benefit. Which of the following sources of income will George need to include to determine whether or not part of his benefit is taxable? Rental income Pension income Tax-free interest income from a municipal bond Taxable interest and dividends

all

Carl is going to reach full retirement age (FRA) later in the current year. He has begun Social Security benefits but is still working. His Social Security benefits will

be reduced $1 for every $3 earned above the earnings cap.

All of these workers are covered under the Social Security system except

certain federal civil service workers hired prior to 1984

For full Social Security retirement benefits, full retirement age

depends on your year of birth

To be eligible for Social Security retirement benefits, one must be

fully insured

A worker's primary insurance amount (PIA) is the amount she receives from Social Security

if she began payments at full retirement age.

Sam was born in 1954, so his full retirement age (FRA) is 66. If he begins receiving Social Security benefits early, the amount of his monthly Social Security checks will be

reduced for the rest of his life

Which one of the following counts as "earnings" for the Social Security earnings test?

self employment net earnings

All of the following statements concerning the Social Security taxes paid by self-employed workers are correct except

self-employed workers are not required to pay Social Security payroll taxes.

Social Security payments are

taxable if your provisional income exceeds the applicable threshold.

An individual's Social Security payment amount will be adjusted annually to account for increases in inflation as measured by

the CPI.

Ann has reached her full retirement age (FRA). She can elect to receive $1,000 now or delay receipt by two years. She expects to live until age 90. Ignoring outside factors, when should she begin her benefits?

two years from now

You are discussing Social Security retirement benefits with your clients. You correctly state that

unearned income may have a bearing on the taxation of their Social Security benefits.

What amount of compensation earned by a taxpayer in 2022 is subject to Medicare taxation?

unlimited