Bob, a 66 years old worker, is deciding between retirement either this year or the next year. His average monthly benefit is determined to be $1,089.50. Assume that the benefit is the same for this year and the next year.

Compute Bob’s annual benefit reduction amounts in each of the following scenarios.

•	If Bob retires this year and secures a part-time job earning $18,000, his annual benefit reduction amount is .
•	If Bob retires this year, secures the same part-time job, and in addition projects interest and dividend earnings of $7,000 per year, what his annual benefit reduction amount is .
•	If Bob retires next year and secures the same part-time job, the annual benefit reduction amount is .

Taxes on Benefits

Social Security is paid in with after-tax dollars but may be subject to tax if annual income exceeds a base amount. A single taxpayer’s base is $25,000. Married taxpayers filing jointly have a base of $32,000. Married taxpayers filing separately have a base of zero.

Suppose Eric is retiring this year at age 67. The following table shows his data.

Part-time salary	$31,500	Annual savings account interest	$275
Annual dividends	$2,500	Annual interest on Denver municipal bonds	$1,350

Based on the income calculated, Eric will have _____% of his Social Security benefits taxed.

Answer rating: 100% (QA)

SOLUTION 1A ANNUAL BENEFIT REDUCTION ANNUAL BENEFIT BEFORE RETIREMENT ANNUAL BENEFIT A... View the full answer