Question 1

Go to http://www.socialsecurity.gov/OACT/quickcalc/index.html to find the "quick" version of the benefits calculator. Imagine you are helping someone (e.g., a relative or a client) understand how the Social Security system operates. Imagine that this person was born on 4/15/1958 and worked through 2022. The individual has had no labor earnings after 2022, but has lived off of other savings while delaying claiming of Social Security so far. However, she now wishes to claim her benefit starting in April, 2024 (the month during which she turns 66).

a. Suppose this individual earned $80,000 in 2022. What is the estimated retirement (not disability) benefit that she can expect to receive according to this calculator? Please calculate using "today's dollars" not inflated future dollars.

b. What if, instead, the person earned $100,000 in 2022? This is a 25% increase in income (which the calculator will assume means a 25% increase in income throughout one's career.) If you recalculate the benefit, does the monthly retirement benefit go up by more than 25%, less than 25% or by exactly 25%?

c. Please explain in plain language to the individual you are advising why Congress likely designed the system so that benefits exhibit the pattern you found by comparing your answers to parts a and b.

d. Continuing with the $100,000 salary example from (b), the individual asks you what would happen if they were able to delay claiming one more year, until April 2025. What happens to monthly benefits in that case? Please explain in plain English why benefits change in this way.

e. The person you are advising says "I heard that Social Security is going to go bankrupt in another 1015 years. Am I going to stop receiving benefits when this happens?" Please answer their question to the best of your ability based on what we discussed in class.