Use Exhibit 14.3 to determine the amount of Social Security retirement benefits that Henry Underwood would receive annually if he had a high (i.e., “maximum”) level of career earnings, is age 62, has a dependent wife (also age 62), and has a part-time job that pays him $24,000 a year. If Henry also receives another $47,500 a year from a company pension and some tax-exempt bonds that he holds, will he be liable for any tax on his Social Security income? Explain.

Transcribed Image Text:

Exhibit 14.3 Selected Monthly Social Security Retirement Benefits The Social Security benefits listed here are illustrations of initial, first-year benefits, given "full retirement age" at 66 (increased to 67 for those born after 1960). As time passes, the beneficiary will receive correspondingly higher benefits as the cost of living goes up. For example, the maximum benefit payable to someone who retired in 1980 was $572 a month; by 2009 those benefits had grown to $2,323 a month. CAREER EARNINGS LEVEL Latest Benefits (2009) Low Average Maximum Retired worker, age 66 $1,045 $1,556 $2,323 Retired worker, age 62 732 1,089 1,626 Family benefits: Retired worker and spouse, both 66 1,568 2,335 3,485 Retired worker and spouse, both 62 1,098 1,634 2,440 Two-income couple" Both retire at 66 2,090 3,112 4,646 Both retire at 62 1,463 2,178 3,252 *Both in the same career income category and both eligible for normal benefits at their career income levels. Source: Based on data from Social Security Administration, http://www.ssa.gov, accessed September 2009.