Question

You expect Social Security will replace 30% of your income. Your average annual career income is $60,000. Since you plan to travel more frequently throughout your retirement years, you think you will need an 85% wage replacement rate. What percent of your income will you be responsible to replace?

A.30%.

B.55%.

C.85%.

D.−15%.

Answer 1

The correct answer is B. 55%. The student will be responsible for replacing 55% of their income during retirement, as Social Security covers 30% and they aim for an 85% wage replacement rate.

Step-by-step explanation:

The student is trying to calculate the percentage of income they need to plan to replace during retirement in addition to what is covered by Social Security. If Social Security covers 30% and the student believes they will need a total of 85% of their income replaced during retirement, we need to calculate the difference between the two percentages:

85% (desired replacement rate) - 30% (Social Security coverage) = 55%% (the percentage the student is responsible to replace).