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18.E: Social Security(Exercises)
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- How is Social Security financed?
- From time to time, you may hear that Social Security is in
financial trouble and that you may not receive the benefits you
expect. Do you think this is true? If it is true, what should be
done about it?
- C. J. Abbott worked hard all his life and built up a successful
business. His daily routine involves helping with management
decisions in the business, even though the majority of it is now
owned and managed by his sons. He continues to draw a salary from
the company sufficient to cover his expenses each month. C. J. is
fully insured under Social Security and applied for benefits at age
sixty-two. However, he does not presently receive, nor has he ever
received, Social Security benefits. He celebrated his sixty-fourth
birthday last May.
- Why hasn’t C. J. received any Social Security benefits? Does
this tell you anything about how much he is earning at the
- Why do you think C. J. continues to work?
- Will C. J.’s benefits be increased for his work beyond age
sixty-five? (Assume that he starts drawing benefits at age
- What is the logic behind the provision in the Social Security
law that leads to a fully insured individual like C. J. not
receiving Social Security retirement benefits after age
- Your father-in-law was employed by a state agency for forty
years before his retirement last year. He was not covered by Social
Security on his state job. During the last five years of his career
with the state government, however, you employed him on a part-time
basis to do some surveying work on a housing development for which
you had an engineering contract. You withheld Social Security tax
from his wages and turned his share, plus yours as his employer,
over to the government.
- When your father-in-law retired, he applied for Social Security
retirement benefits. Several months later, he was notified that he
was not entitled to benefits because the work he did for you was in
the family and not bona fide employment. The implication in the
notice he received was that the job you gave him was designed to
qualify him for Social Security benefits rather than to provide him
with real employment.
- What should your father-in-law do?
- How can you help him?
- Does the economic recession beginning in 2007 tell you anything
about the merits, or the risks, of shifting Social Security funding
to individual private accounts?