Bob, a 66 years old worker, is deciding between retirement

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.

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