Question

Suppose James is thinking about retiring one year earlier than he had planned. Which of the following reasons motivates him to do so?

A.Since earnings generally rise with age, his 35-year benefits average will be lower.
B.He won't pay an extra year of payroll taxes on his earnings.
C.He'll get a lower Social Security benefit level than he would otherwise have.
D.He will collect Social Security benefits for a smaller number of years

Answer 1

Retiring early could save James from paying an additional year of payroll taxes, potentially lower his Social Security benefit level, and result in collecting benefits for fewer years.

Step-by-step explanation:

If James is considering retiring one year earlier than planned, he could be motivated by different reasons. Option B suggests that by retiring early, he won't pay an extra year of payroll taxes on his earnings, which means he could save money on taxes that would have been taken from his income if he continued working. However, Option C indicates that if James retires early, he'll get a lower Social Security benefit level than he would otherwise have, because benefits are calculated based on average earnings over a worker's career, and retiring early could lower that average. Lastly, Option D points out that by retiring early, James will collect Social Security benefits for a smaller number of years, considering the potential increased life expectancy and the fact that he would start collecting benefits earlier in his life.