Question

David retires at the age of 70, the last year he worked he earned $40,000 and his social security payments for the first ear total $20,000. What is his replacement rate

Answer 1

If David retires at the age of 70, the last year he worked he earned $40,000. His replacement rate is: 50%.

Replacement rate

We would be using this formula to determine the replacement rate

Replacement rate=Social security payments/Amount earned last year ×100

Where:

Social security payments=$20,000

Amount earned last year=$40,000

Let plug in the formula

Replacement rate=$20,000/$40,000

Replacement rate=0.5×100

Replacement rate=50%

Therefore If David retires at the age of 70, the last year he worked he earned $40,000. His replacement rate is: 50%.

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