FIRE 449 Chapter 18 Quiz Questions
Which one of the following surviving spouses of a deceased insured worker would not be eligible for Social Security benefits? A. A surviving spouse, age 59, with a 17-year-old daughter in high school B. A surviving spouse, age 62 C . A surviving spouse, age 57, with a child who became disabled before age 22 D. A surviving spouse, age 62, still workingthreshold, there is no reduction in benefits.
A. A surviving spouse, age 59, with a 17-year-old daughter in high school The child has to be under age 16 for the spouse to have a "child in care." The question asked about the surviving spouses, not the children. Yes, answer D is debatable. It does not say how much she is making.
1.How does the earnings test affect Social Security benefits?
According to the provision of the earning test, the Social Security retirement benefit may be reduced for a retiree who is younger than normal retirement age and whose annual earned income exceeds the retirement earnings exempt amount. Its purpose is to limit monthly cash benefits for retirees who have earned income and to reduce the cost of the Social Security program. See: https://www.ssa.gov/OACT/COLA/rtea.html
1.How does a worker become fully insured under Social Security? What benefits are fully insured workers entitled to?
An employee can earn a maximum of four credits per year, even if he or she did not work the full four quarters, as long as he or she made enough even in one month. A Social Security beneficiary is fully insured once forty credits of coverage are earned, or when the beneficiary has a minimum of six credits of coverage and, if greater, at least as many quarters of coverage as there are years elapsing after 1950 (or after age 21, if later). If the worker's status is fully insured, most types of Social Security benefits are payable.
What are Social Security credits?
Credits are the "building blocks" Social Security uses to find out whether you have the minimum amount of covered work to qualify for each type of Social Security benefit.
When a person claims spousal benefits it causes their spouse or ex-spouse's Social Security benefit to be reduced.
False. Spousal benefits do not cause the primary earner's benefit to be reduced, even if more than one person is claiming on that record.
1.Dan Wolf, Duncan Smith, and Jim Lavell are employees of the Happy Wood Company. Fifteen months ago, Dan Wolf was injured when a log fell on him and hurt his back. He has not been able to work since. Duncan Smith, who had 15 years of service with the company, was killed in that accident. He left a wife and five children. About a month later, Jim Lavell injured his back at home and he, too, has been unable to work since the accident. a)Based on the benefits of the social insurance programs you described above, compare the type of benefits Dan, Duncan, and Jim (or their families) are receiving. b)What are the eligibility conditions that must be met to receive these benefits?
Answer a: Benefits received by Dan include •Disability benefits coordinated with WC and SS •No Medicare benefits (whenever necessary) since getting full medical from Workers' compensation Benefits received by Duncan's beneficiaries include •Survivors' benefits from WC and SS Benefits received by Jim include •Disability benefits •No Medicare benefits (whenever necessary) since getting full medical from Workers' compensation
Name three key life stages where Social Security provides support.
Any three of these are correct: birth, first job, marriage, disability, loss of a loved one, retirement
True or False: Your average earnings during your working years determine how much your monthly benefit payments will be.
True
For a wife to claim a spousal benefit, the husband must take his benefit.
True It's also true if the roles are switched or if both spouses are of the same sex. The only way to take a spousal benefit when a couple is married is for one spouse to claim his or her benefit. The other spouse is then eligible to claim a spousal benefit. That means for one-earner couples the decision of when to claim benefits is tightly tied together. For married couples in which each spouse qualifies for a benefit based on his/her own earnings record, a lower-earning spouse can take his/her own benefit and then later jump up to a higher spousal benefit when the higher earner claims his/her benefit.
Children can receive Social Security benefits.
True-Children under age 18 can receive Social Security benefits if their parent or guardian is receiving benefits. They can also collect survivor benefits in the event of a parent's death.
You can increase your monthly Social Security benefits by delaying receiving benefits until age 67.
True-For those born in 1960 or later, the full retirement age is 67. If you receive benefits before reaching that age, then your monthly benefits will be reduced, depending on how early you begin receiving them. (The earliest age you can begin receiving benefits is 62.)
A divorced spouse can collect benefits on an ex-spouse's record, even if the former spouse has not claimed benefits.
True. Divorced spouses do not have to wait for their former spouse to claim benefits, but they do have to wait for their ex to turn 62 before they can claim on their record.
Once you start to receive Social Security benefits as you continue to work, you'll pay neither Social Security taxes on your earned income nor state and federal tax on your Social Security benefits.
A False Sorry, Charlie. Your earnings are subject to payroll taxes even if you are currently receiving Social Security benefits. For 2018, you pay 7.65% on your wages and your employer pays 7.65%, up to the 2018 earnings ceiling of $128,400. If you earn more than that, the Social Security payroll tax disappears, but you and your boss continue to pay the 1.45% Medicare payroll tax on every dollar you earn. Self-employed workers pay both portions of the taxes for a combined rate of 15.3%. Single filers with earned income of more than $200,000 and joint filers with earned income of more than $250,000 pay an additional 0.9% in Medicare taxes above those rates. And for retirees receiving benefits, up to 85% of your Social Security benefits may be taxed when you file your federal income-tax return each year. NE
Government workers do not pay into Social Security.
False. Since 1984 all new federal government employees, including members of Congress, have been paying into Social Security and are eligible for full benefits.
Why was the Social Security Act of 1935 created?
Social Security was created to promote the economic security of the nation's people.
You can collect two full checks at the same time — a spousal benefit and a benefit based on your own work record.
False. A person can collect on only one record at a time. However, in some cases it is possible to switch benefits to maximize your lifetime income.
A worker will be entitled to Social Security disability benefits if which of the following is true? I. has been disabled for 12 months or is expected to be disabled for at least 12 months or has a disability that is expected to result in death II. is NRA or over III. is insured for disability benefits IV. has filed an application for disability benefits V. has completed a 5-month waiting period or is exempted from this requirement A. All of the above B. I, III, IV, V C . II, III, IV D. III, V E. IV, Vis no reduction in benefits
B. I, III, IV, V
Who pays FICA taxes?
Both employees and employers pay FICA taxes
Foreign citizens cannot collect Social Security benefits.
False. As long as a person has paid into Social Security for 40 quarters (10 years), he or she will be eligible for Social Security benefits.
Bob, age 63+, is debating retirement and taking Social Security benefit 36 months early. He is a fully insured worker. Which of the following is true? I. He will be eligible for Medicare. II. He will receive 80% of his normal retirement age benefit. III. If he works part-time, his benefits will be reduced by 20%. IV. If he works part-time, his benefits will be reduced $1 for every $3 he earns above a specific earnings threshold. V. If he does not work, his benefits may or may not be subject to federal income taxation. A. I, II, III, IV B. II, IV, V C . III, IV D. II, V E. V.
D. II, V He will not be eligible for Medicare until age 65 (Answer I). If he works part-time, his benefits will be reduced $1 for every $2 he earns above a specific threshold before his benefits (Answer III and IV). His benefits will be subject to federal income tax if his AGI plus ½ of his benefits exceed $25,000+. Answer V is right because of "may". We do not have his AGI. If V said "will", then the answer would be incorrect. You need to back into the answer. Answers I, III and IV are incorrect. 36 months is 80% (36/180).
Who benefits from Social Security disability insurance?
Disabled workers, spouses, and children can benefit from Social Security disability insurance.
If legislative changes are not made before 2034, how much of each benefit will Social Security be able to pay?
Even if legislative changes are not made before 2034, Social Security will still be able to pay 79 percent of each benefit due.
An annual cost-of-living adjustment (COLA) is guaranteed.
False. COLA increases are based on inflation. If there is no inflation in a given year, benefits will remain the same in the following year.
You planned to wait until age 70 to claim Social Security to earn 8% a year in delayed-retirement credits to boost your full retirement age benefit by 32%. But at age 68, you've decided you must take your benefits now. You'll lose the credits you earn.
False Deciding to delay isn't an all-or-nothing proposition. You can change your mind anytime, and you will get to keep the delayed credits you earned—and those credits actually accrue monthly rather than annually. So if you decide to take your benefit two and a half years past full retirement age, you'll get a 20% boost to your full benefit.
If you delay claiming your Social Security benefit, you will miss out on cost-of-living adjustments until the year you actually claim.
False No matter what age you claim your benefit, the Social Security Administration will figure in all cost-of-living adjustments for each year since you turned 62—which is the year you are first eligible for a benefit. If you wait until age 70 to claim your benefit, you'll get your delayed-retirement credits plus eight years' worth of COLAs.
If you are divorced, you can't collect retirement benefits based on your ex-spouse's earnings record.
False You can collect retirement benefits based on your ex-spouse's work history if you are at least 62 years old, were married at least ten years, have been divorced at least two years and have not remarried (or if you did, that subsequent trip to the altar ended in divorce, death or annulment). Unlike married beneficiaries, the ex-spouse doesn't need to have applied for benefits, but the ex-spouse must be eligible for benefits, which means he/she must be at least age 62. If you collect benefits before your normal retirement age, early retirement reductions and earnings limitations apply.
True or False: The taxes you pay go into an account with your name on it for your retirement.
False - Today's workers help pay for current retirees' and other beneficiaries' benefits, not their own future benefits.
A couple must be married for at least 10 years before a person can collect spousal benefits on their partner's record.
False. The 10-year rule only applies to divorced couples that are claiming on their former spouse's record. Newly married couples only have to wait one year before they become eligible for a spousal benefit.
How many credits do you need to be eligible for disability benefits?
In general, you need 40 credits, with 20 earned in the last 10 years ending with the year you become disabled. However, younger workers may qualify with fewer credits.
1.Social Security benefits are financed largely through payroll taxes. The more you earn (up to the maximum earnings base), the more tax you pay. Income benefits, however, favor lower-income workers. Explain why lower-income people are favored.
Lower-income people are favored because the formula to calculate the Social Security benefits, expressed as replacement ratios, are weighted in favor of lower-income workers. This formula is designed so that low-income workers receive a higher percentage of their pre-retirement income than do average- and middle-income workers. In addition, by annually adjusting the bend points (the dollar amounts in the formula) to reflect wage inflation, the replacement rates for workers with comparable earnings histories stay the same. A replacement ratio is defined as the Social Security benefit divided by the AIME.
What is the difference between Medicare Part A and Medicare Part B?
Medicare Part A plan provides hospital-related benefits which include in-patient hospital services, posthospital home health services, and hospice care. Medicare Part B provides coverage for physician services, out-patient hospital services, certain home health services, durable medical equipment, and other items. Medicare A is financed by 1.45% of total income paid by employer and employee. Medicare B is paid by beneficiaries from the PIA check.
1.Medicare costs have turned out to be much greater than expected when the program was first enacted. The number of people eligible for Medicare and the benefit amounts have increased through the years. For example, Medicare covers not only medical expenses for eligible retirees but also kidney dialysis and kidney transplants for persons of all ages. a)Why does Medicare have deductibles, coinsurance, and limitations on benefits that create gaps in coverage for insureds?
Medicare has deductibles, coinsurance, and limitations on benefits that create gaps in coverage because medical care is very expensive and Social Security cannot completely cover all the risks. Medicare coverage, therefore have gaps and provide options for insureds to fill these gapes through cost-sharing (deductibles and coinsurance).
Is Social Security only for retirees?
No, Social Security is not only for retirees. Social Security benefits workers and their families throughout life.
1.How is Social Security financed?
Social Security benefits are financed through payroll taxes paid by employers and employees and by a special tax on earnings paid by the self-employed. The tax rate for employers and employees is 6.2 percent for OASDI, up to a maximum amount of earnings called the wage base level. Social Security taxes, sometimes called FICA taxes (after the Federal Insurance Contributions Act of 1939), are automatically withheld on wages up to a set amount and are adjusted annually for inflation. Any wages earned over this wage base are not taxed for Social Security, although Medicare Part A taxes are still deducted.
Who benefits from Social Security?
Social Security benefits workers and their families across America.
1.Does the economic recession beginning in 2007 tell you anything about the merits, or the risks, of shifting Social Security funding to individual private accounts?
Social Security is a governmental program. Privatization of Social Security funding to individual private accounts would pose a risk of liquidation of private accounts during economic recession. Shifting Social Security to individual private accounts would make the Social Security program like any other insurance program, which has a risk of loss of coverage if the private account liquidates during economic recessions or any other factor. A good example is the amounts of loans employees took from their 401K accounts.
Your annual cost-of-living adjustment can be zero.
Sometimes your COLA may be on a strict diet. Whether beneficiaries get a cost-of-living adjustment depends on the rate of inflation in the prior year. In recent years, inflation has been extremely tame and sometimes practically nonexistent. And that means beneficiaries haven't gotten sizable annual pay raises—even if their costs for health and housing expenses actually went up. The COLA for 2015 was zero, and the 2016 COLA was just 0.3%. But the COLA for 2017, which kicked in as of January 2018, hit 2.0% as inflation ticked up. The annual COLA is announced each October for the following year.
1.Explain the concept of Medicare Part D.
The concept of Medicare Part D is to provide persons with limited income and resources with extra help paying for their prescription drugs. When reaching the total amount of out of pocket expense, the co-insurance is 5%.
How many Social Security trust funds are there? What are they called?
There are two Social Security trust funds - Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI).
1.C. J. Abbott worked hard all his life and built up a successful business. His daily routine involves helping with management decisions in the business, even though the majority of it is now owned and managed by his sons. He continues to draw a salary from the company sufficient to cover his expenses each month. C. J. is fully insured under Social Security and applied for benefits at age 62. However, he does not presently receive, nor has he ever received, Social Security benefits. He celebrated his 64th birthday last May. a)Why hasn't C. J. received any Social Security benefits? Does this tell you anything about how much he is earning at the business? b)Will C. J.'s benefits be increased for his work beyond age 65? (Assume that he starts drawing benefits at age 70.) c)What is the logic behind the provision in the Social Security law that leads to a fully insured individual like C. J. not receiving Social Security retirement benefits after age 65?
The earnings test applies to C.J. because he retired at sixty-two. C. J. is qualified for Social Security retirement benefits, but received none because of the earnings limitation, which provides that the Social Security retirement benefit may be reduced for a retiree who is younger than normal retirement age and whose annual earned income exceeds the retirement earnings exempt amount. For each year C. J. worked beyond age 65, his benefits will increase 3 percent above those for a person retiring at age 65 with the same earnings record. The table of increases in benefits is at: https://www.ssa.gov/OACT/ProgData/ar_drc.html The logic purpose is to limit monthly cash benefits for retirees who have earned income and to reduce the cost of the Social Security program.
.What percentage of your gross wages go to FICA taxes?
The total FICA tax is 15.3 percent of your gross wages. (6.2 + 1.45)
If I keep working while collecting benefits, my income will be subject to the payroll tax.
True. Payroll taxes are deducted from almost all workers' paychecks, regardless of age. While you cannot avoid these taxes, it is possible that they can increase your monthly benefit in the future.
True or False: Social Security disability insurance is coverage that workers earn.
True. Social Security disability is a social insurance program under which workers earn coverage for benefits by working and paying Social Security taxes on their earnings.
Under the current rules, you can collect retirement benefits as early as age 62. But your monthly benefit will be less than if you wait until 66 to take it, and your benefit will be reduced further if you continue to work and earn more than the annual limit prescribed by Uncle Sam.
TrueIf you were born between 1943 and 1954, your normal retirement age for full retirement benefits is 66; that age rises if you were born later. You can collect retirement benefits as early as 62, but today's 62-year-olds will see a 27% haircut (and a cut of 30% if you were born in 1960 or later). Plus, if you continue to work while collecting benefits prior to the year you reach full retirement age, you will lose $1 in benefits for every $2 you earn over government limits. In 2018, the annual earnings limit is $17,040. Once you reach your normal retirement age, you can earn any amount without affecting your benefits.
1. Do you think Social Security coverage should be voluntary? Explain.
Yes. •Competition in this field should be encouraged. •Employees should have the option to customize their portfolio according to their preferences. •Employees should have control over the amount of money they want to spend and the amount of money they want to invest. No. •If given an option, many employees may not opt for any coverage. •Low-income workers may not have the advantage in other coverage. •People may not save for their retirement and will need welfare. SS is not need based. Eliminate soup kitchen as it was during the depression in 1935.
How many credits do you need to receive retirement benefits?
You need 40 credits (10 years of work).
What is your first connection point with Social Security?
Your connection with Social Security more than likely started at birth - when your parents registered you for your Social Security card.
Lorenzo, a construction worker, was hit by a car while working alongside a busy highway. His average weekly wage before the accident was $500. The state he lives in provides workers' compensation benefits at a replacement ratio of 66.7 percent, with a maximum benefit of $400 a week. If Lorenzo is temporarily and totally disabled for twelve weeks, how much compensation can he expect to receive
a.66.67%- 4,000 333 dollars 333*12=4,000
Which of the following reasons can be attributed to the long-term financing gap faced by the Social Security and Medicare programs? a)Increasing birth rates and health care costs b)Pay-as-you-go system and declining birth rates c)Traditional system and increased longevity d)Increased birth rates and declining longevity e)Increased morbidity and birth rates
b)Pay-as-you-go system and declining birth rates
4.What are the different Medicare programs available and what does each provide a)Medicare A - Hospital, Medicare B - Drugs, Medicare D - doctors and Medicare C- Medicare Advantage b)Medicare A - Doctors, Medicare B - Drugs, Medicare D - Hospital and Medicare C- Medicare Advantage c)Medicare A - Hospitals, Medicare B - Doctors, Medicare D - Drugs and Medicare C- Medicare Advantage d)Medicare A - Advantage, Medicare B - Drugs, Medicare D - doctors and Medicare C- Hospitals
c)Medicare A - Hospitals, Medicare B - Doctors, Medicare D - Drugs and Medicare C- Medicare Advantage
Which of the following statements is true about retirement income benefits, if a fully insured worker retires? a)A divorce spouse of a retired worker is not entitled to monthly benefits. b)A spouse of a retired worker is entitled to monthly benefits only if she is unemployed. c)A divorce spouse of a retired worker is entitled to benefits if the marriage lasted at least five years. d)A dependent child of a retired worker is entitled to benefits if he or she is under the age of eighteen. e)A dependent great-grandchild of a retired worker is entitled to benefits if he is disabled, and the disability began after age twenty-two.
d)A dependent child of a retired worker is entitled to benefits if he or she is under the age of eighteen.
The maximum family benefit is the maximum monthly amount that can be paid on a worker's earnings record. When the family reaches its maximum family benefit, the: a)worker's benefit is reduced. b)benefit of the survivor is stopped. c)benefit of the dependent is stopped. d)worker's benefit is stopped. e)worker's benefit is not reduced.
e)workers' benefit is not reduced.