Chapter 10-Reviw nane:_Key 1, In 2020, the maximum taxable income for Social Security was $147,700. The tax rates were 6.2% for Social Security. a. What is the maximum anyone could have paid into Social Security tax in the 2021? mn’ (48 1447, 400)( 0-062) = (84,157.40 b. Roy had three jobs in 2020. One paid him $56,000. One paid him $67,000. One paid him $35,000. Each employer took out 6.2% for Social Security (SS). How much did Roy overpay in Social Security in 20212 SS from Employer 1 (salary $56,000): 56,000 x .0b82 = 3472 SS from Employer 2 (salary $67,000): 67,008 x -ov2 = MS SS from Employer 3 (salary $35,000): 35,000 x - 062 = 2170 Total: ea1ae . Amount Roy overpaid: ANA’ — QIST.4o =(63¢8, 40. 2. In 1980, the amount of earnings required to earn one Social Security credit was $400. In the tax year 1980, Freda earned $157 biweekly. How many Social Security credits did she earn in 19807 @sTX20 pay pewods) 2 Hote pear $ 4082+ Yyoos 102 lo2 > she corned the maximum 4 credits 3. In 2019, Samantha turned 62. She would like to calculate her Social Security full retirement benefit if her average monthly salary over her 35 highest-paying years was $4,000. Round to the nearest dollar. Recall the formula is: Find 90% of the first $926 (0.40) (426) = $33. Yo Subtract to find the ear 2 over $926 mms BY ovo~ Faw = #5074 Find 32% of earnings over 3926 (0.32 (2074) = $493, 62 Find! the iim $>3.40 + 493.U8= F187, 08Chapter 10- Review Name: 4. Fred's annual salary is $110,000. His employer matches his 401(k) contributions at $0.67 for each dollar up to 10% of his annual salary. Fred contributes $450 from each biweekly paycheck to his 401(k) account. What is the combined total of his annual contribution and his employer's contribution? 10% of annual salary (0.10) (1,000) = 11,000 (ymax) Max employer match amount ( 0.61)(\I,000) > $1370 Fred's biweekly contribution 4450 Fred's annual contribution #uU50 x 26 = \\, 700 Combined total contribution 11,706 +7370 = | $19,076 5. Florence started collecting Social Security at age 65. Her Social Security full monthly retirement benefit is $3,000. Her benefit is reduced since she started collecting 11 months sooner than full retirement age. What is her benefit? (Recall that if you start collecting Social Security before age 66.5, your full retirement benefit is reduced by 5/9 % or 0.0056 for each month you retire early. penalty: (a snare 28889 = all $3000 - (.ob1v)(%000) = (.4384)(3000) =($281S.20 Sal Death Probability 6. a. If a company insures 20,000 64 year old Age_| Males | Females | males, how many are expected to die before their 62 65 birthday? 63 6s To (20,000)(0.01 6561) = 331.34 65 0.011511 66 0.012572 67 0.013772 b. What is the probability that a 63 year old female will live to her 64 birthday? Proleaorlihy of ving = L~ prwobabilit, of dying = 1 - 0.09747Chapter 10 - Review Name: 7. The Johnson Insurance Company sells a 5-year term insurance policy with face value of $500,000 to a 41 year old man for an annual premium of $1000. The mortality table is shown below: Age at Death 40 4 42 43 44 Age >44 Mortality Rate 0.0008 0.0009 0.0011 0.0012 0.0013 p %5.9947 Assume the policyholder pays the premium annually. What is the insurance company's profit on this policy for each year of death? a. Death atage 40: 1000 — SU0,000 = 484 006 b. Death at age 41; 2 (1006) ~ SLO, 000 = ~ 448,c00 = -497, 006 c. Death at age 42: 3 (100) ~ F0U,2P° = 744,006 d. Death at age 43: 4( 1000) ~ $00,000 2 = ~445, 000 ©. Death at age 44: 51000) ~ 20°, 000 " f. Death after age 44: 5 (1b00) = Sd0b g. What is the expected profit from selling one of these policies? (0.0008) (-uaaic) + (ooor-4a8) + (oon -4a1k) + (0. 001 )(~44bKe) + (.0013\-4asd) + (0 BAN s000) = [234070 probaloility of Aying after age 44 = |~ (0008+ .0004 + ,ovil 4 .00l+, aig) = 0.9a42 h, What is the company’s expected profit from selling 10,000 of these policies? $23 uv7, 000 l 10,000 % 234070‘Chapter 10 - Review Wine 11 Ifline 11 (taxable (taxable income) is— Income) Is— at pat [Sige | [a put | Single least less least less than than { 72,000 75,000 72,000 72,080 11,904] | 75000 75050 12364 >| 72,080 72,100 11,715 | 75950 75,100 12.375 72,100 72,150 11,726|~p75,100 75.150 12.386 7a1s0 72200 11,737] | 75,150 75200 12397 72.200 72250 11,748] | 75200 75.280 12,408, 7280 72300 11,759] | 75280 75300 12,619 72300 72350 11.770] | 75300 75350 12,430 ‘aso 72400 11,781| | 75350 75400 12451 ‘400 72450 11,792) | 75400 75.450 12,452 72480 72,500 11/803) | 75480 75.500 12,463, 72500 72550 11,814| | 75500 75.550 12,474 Tasso 72.600 11,825] | 75580 75.600 12485, 72,600 72,650 11,836) | 75,600 75.650 12,296 72.680 72,700 11;847| | 75680 75.700 12.507 72,700 72,750 11,858) | 75,700 75.750 12,518, 7.750 72,800 11,869) | 75,750 75,800 12,529 ‘72800 72.880 11,880] | 75,800 75.850 12340 ‘72.880 72,900 11,891 | 75,850 75,900 12,351 7.900 721950 11,902) | 75,900 75.980 12,362 7.980 73.000 11913] | 75,980 76,000 12,373, Name: 8. Crystal contributed $220 yer month into her retirement account in pre-tax dollars during the last tax year. Her taxable income for the year was $72,050. She files as a single taxpayer. a. What was the annual total she contributed in pre-tax dollars? $220 xiv = BIS Note: Her taxable income when contributing pre-tax dollars is $72,500. b. What were her taxes for the above scenario? F715 c. What would her taxable income have been had she contributed to the account in after-tax dollars? 12,500 + 264> SISI4O d. Use the tax tables to calculate her tax for parte. $12,360 e. How much does she save in taxes by contributing pre-tax dollars to her retirement? 3g 12,386 -11,15 =\"UTl\Chapter 10 - Review Name: 8. Shiloh is 61 years old. She plans to retire in 4 years. Her final working year's salary will be $100,000. Her financial advisor told her she should have 60% of her final year annual income available for use each year when she retires. @. What is the income she should have available per year once she retires? $100,000 x 160 2], 000) b. Assume that Shiloh is planning on using 50% of her current salary in each of her first 5 years of retirement. What should that annual amount be? # 100,000 x .s0 =(60,00 10. Benjamin's employer offers an annual pension benefit for employees that have worked for the company for more than 8 years. The benefit is calculated by multiplying 10% of the career average salary by the number of years that exceeds 8 that the employee has worked for the company. Benjamin's salary for the first 15 years was $30,000. After that, his salaries were $35,000; $40,000; $45,000 and $50,000. a. What is Benjamin's average salary over the past 19 years? J. (6+ 20,200) 35,0004 40,000 4 US 000 + 5,000 ] + 1a =[32,431.58 b. What is Benjamin's annual pension under this plan? (.10)(14- 8)(32, 631.58) = [635,804 74 c. What Percentage of his final annual salary will be his annual retirement salary? 35,844.74 Be Sane 2 78 = [7.8% | 11. AISD offers their employees a flat pension plan in which a predetermined dollar amount Years Employed — Multiplier (multiplier) is multiplied by the number of years of 15-19 $52 service to determine the monthly pension benefit 20-25 $57 <— using the schedule shown, 304 $60 Afier 23 years, Gail is leaving. She has been told that there will be a 3% cost of living adjustment (COLA) on the multiplier soon after she retires. Calculate Gail's pension after the COLA adjustment. a. Before COLA: (572 yes) = $3.1 b. AfterCOLA: #i3){ x 1.03 =|$1390 +35Chapter 10 - Review Name: 12, Tesla uses a final average salary formula to calculate an employee's pension benefits. The calculation uses the salary average of the final 3 years of employment. The retiree will receive an annual benefit that is equivalent to 2% of the final average multiplied by the number of years of employment. Rachel and Ross are both retiring at the end of this year. Calculate their annual retirement pension based on the following: Rachel: years of employment: 20 Final three annual salaries: $90,000; $100,000; $110,000 a. Rachel's final 3 year average salary: 100,000 b. Rachel's annuel etrement pension: (100,000 Y( 20 yems*)( , 02) = [ee| Ross: years of employment: 25 Final three annual salaries: $70,000; $75,000; $90,000 a. Ross's final 3 year average salary: 16,333 b. Ross's annual retirement pension: 7 8,333 zsyews)( 02) = (ieee 13. Steven's employer offers a pension plan that calculates the annual pension as the product of the final average salary, the number of years of service, and a 5% multiplier. His employer uses a graded vesting formula according to the schedule shown. Steven decided to leave after 4 years of service. What percent of his pension will he receive when he retires? Years Employed Vesting Percentage 0 0% 0% 1 2 28% \7 8° \ 3 45% 4 78% 5 100!