Question

Social Security Administration (SSA) provides social security benefits to a person average of 35 years of her/his earnings. If the person has less than 35 years of earnings, the administration uses $0 income for those years for which she/he has no earnings. Every $0 is replaced by every year of earnings. Currently, the person is getting $30,000 yearly benefits for her/his 20 years earnings. She/he plans to report $84,000 earnings to SSA next year, her/his increase in monthly benefits will be:

a. $195 b. $190 c. $200 d, $192

Answer 1

For 20 years of earnings, the benefit amount here is given to be $30,000

Therefore, $30,000 is the average of 15 years of 0 earning and 20 years of his earning.

Let the sum of earnings for 20 years of work be S. Then, we have here:

35*30,000 = S

Now for next year earning is reported to be 84,000. Therefore the new average here is computed as:

= (S + 84000) / 35 = (35*30000 + 84000) / 35 = 32,400

Therefore Total increase in yearly benefit here is given as: 32,400 - 30,000 = 2,400

Therefore increase in monthly benefit = 2400/12 = 200

Therfore c) $200 is the required increase here.