Felicity is 50 years old and earns $115,000 per year. She saves 12% of her annual gross income for retirement. Felicity will pay off her mortgage by the time she retires. Her monthly payment is $1,950.21. The current FICA payroll tax rate is 7.65%. Calculate her wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars. Assume that she wants to maintain her lifestyle, so no other changes in expenditures. (Hint: Top-down approach starts with current income and subtracts off expenses that will go away in retirement. The new number divided by the current income is the wage replacement ratio). A. 80% B. 68% C. 88% D. 60%
Felicity is 50 years old and earns $115,000 per year. She saves 12% of her annual gross income for retirement. Felicity will pay off her mortgage by the time she retires. Her monthly payment is $1,950.21. The current FICA payroll tax rate is 7.65%. Calculate her wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars. Assume that she wants to maintain her lifestyle, so no other changes in expenditures. (Hint: Top-down approach starts with current income and subtracts off expenses that will go away in retirement. The new number divided by the current income is the wage replacement ratio). A. 80% B. 68% C. 88% D. 60%
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 43P
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Felicity is 50 years old and earns $115,000 per year. She saves 12% of her annual gross income for retirement. Felicity will pay off her mortgage by the time she retires. Her monthly payment is $1,950.21. The current FICA payroll tax rate is 7.65%. Calculate her wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars. Assume that she wants to maintain her lifestyle, so no other changes in expenditures.
(Hint: Top-down approach starts with current income and subtracts off expenses that will go away in retirement. The new number divided by the current income is the wage replacement ratio).
| A. |
80% |
|
| B. |
68% |
|
| C. |
88% |
|
| D. |
60% |
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