Use the below information to select the best answer

David is age 64 and in very good health. Assume that he reached age 50 before January 1, 1986.

Kathy is age 58 and in good health. Assume that she did not reach age 50 before January 1, 1986.

David and Kathy have been married for 30 years and have no children.

David earns $75,000 annually as a general sales manager for a paper manufacturing company. He has worked for the company for 18 years.

Kathy earns $45,000 annually as a nurse for the local school system. She has been employed with the school system for 10 years.

David's Retirement Plans

David is covered by his employer's money purchase plan. He is 100% vested in his account, which is valued at $145,000. His account is invested in an index stock mutual fund. The cost basis in his account is $10,000.

The money purchase plan offers three retirement distribution options:(1)lump sum, (2) life-only annuity, and (3)a joint and 50% survivor annuity. Normal retirement is at age 65.

David also has made salary reduction contributions to the company's 401(k) plan for the last seven years. The account is valued at $56,000. The account has no cost basis. The plan offers lump-sum and various annuity distribution options.

David is not a key employee.

Kathy's Retirement Plans

Kathy has been making salary reduction contributions to her employer's tax-sheltered annuity custodial account. Her current account balance is $9,000.

Kathy also has an IRA with a current balance of $13,000.

Other Information

David and Kathy file joint federal and state income tax returns.

Which of the following is a correct statement about the financial situation of David and Kathy?

Select one:

A). David would not be eligible for Social Security benefits because he is not fully insured.

B). At age 65. David will be eligible for Social Security retirement benefits that will be equivalent to 80% of his PIA

C). If David retires at age 65 and begins receiving Social Security retirement benefits, Kathy can receive Social Security benefits based on his earnings at a rate of 50% of his PIA.

D). If David continues working in the year he turns age 65 and begins receiving Social Security benefits at the beginning of that year, his Social Security retirement benefits will be reduced by $1 for every $3 of income above the earnings limitation earned in the months preceding his 65th birthday.

E). None of the above.