Question:*** please help me understand this.*** Thanks

Use As information for B and C as well.

A. Assume the social security system earns a 2.5% real rate of return for an individual paying a 15% payroll tax on a constant real annual $25,000 salary over a typical 40 year working life.

What will the annual retirement benefits be if we assume a retirement period lasting 20 years?

Correct answer: $16,213.80

B. For this scenario, the replacement rate of preretirement income is

Correct Answer: 64.9%.. This is a bit short of the oft recommended 75% replacement rate.

What will happen to the annual retirement benefits and the replacement rate if early retirement at age 62 is taken?

Correct Answer: both the annual benefit and the replacement rate will decline