Question

a. Workers pay 5% in taxes to finance Social Security

a. Workers pay 5 % in taxes to finance Social Security b. The Early Entitlement Age is 62. and the Full Benefits Age is 67 Social Security benefits are equal to 20% of the average of the worker's earnings in the 10 highest earning years d. Benefits are reduced by 5 % for each vear a worker claims benefits early relative to the Full Benefits Age (Example: claiming benefits 2 years early means a 10% reduction, and claiming benefits 3 years early means a 15% reduction) Lisa is 62 and is deciding between retiring early now or working for one more year. The chart below shows Lisa's 10 highest earning vears and her earnings next year if she works: Rank Earnings (thousands) 1 50 2 48 48 48 5 45 45 7 40 8 39 39 10 39 Next Year 50 a. What are the pros and cons of working for one more year? No calculations needed; just describe Lisa's considerations. LO Co

Answer 1

a) Lisa should work one more year because

there is 5 % deduction if she is claiming before the if she claim early before relative to the full benefit age

and also she will be getting the highest pay in her entire life that is 50,000 it makes her average score relatively greater than existing if she will not work for one more year she can relax or move into the leisure and have to face the loss of reduction as well as the loss of extra average score for the system security scheme.

b) if she works

her average score on which she will be getting the 20% scheme benefit

if she will work one more year average income will be 45,200

she will be getting benefit of = 9040

if she will not work for one more year than = 44,100

she will be getting the benefit of = 8820

if she will not work for one more year than she have to bear the loss of amount of 220  in the scheme

and also she is paying 5% tax in social security scheme in more one year she will work but if she will not work then she again have to bear the loss of 5% again in the social security scheme