Question

Stacy, a self-employed accountant, currently earns $100,000 annually. Stacy has been able to save 18% of her annual Schedule C net income. Assume that Stacy paid $11,000 in Social Security taxes, and that she plans to pay off her mortgage at retirement, thereby relieving her of her only debt. Stacy presently pays $1,500 per month toward the mortgage. Based on the information provided herein, what do you expect Stacy’s wage replacement ratio to be at retirement?

Answer 1

Wage Replacement Ratio = $53,000 / $100,000 = 53%

Step-by-step explanation:

Total Mortgages = $1,500 x 12 = $18,000

Dollar Value Percentage

Salary $100,000 100%

Less: Self-Employment Taxes (11,000) (11%)

Less: Savings (18,000) (18%)

Less: Mortgage Payments (18,000) (18%)

$ 53,000 53%

Wage Replacement Ratio = $53,000 / $100,000 = 53%