5.5 Social Security and Medicare

Multiple Choice

For which of the following graphs is the range "all real numbers greater than or equal to 0"?

• 
  $$y=x^2-11$$

• $$y=\left|x-15\right|$$

• $$y=12$$

• $$y=3x+3$$

Financial Algebra Second Edition

Slide 2

5-5 Social Security and Medicare

Learning Goals

The students will be able to:

• Compute paycheck deductions for Social Security.

• Compute paycheck deductions for Medicare.

Financial Algebra Second Edition

Slide 3

What Are Social Security and Medicare?

•

Did you ever notice a FICA box on your paycheck stub?

Employers match employee contributions to Social Security and Medicare. What are these matching funds used for?

•

Financial Algebra Second Edition

Slide 4

Example 1:

Ramiro got his first job in 2020. In that year, Social Security tax was 6.2% of income up to $137,700. Medicare tax was 1.45%. If Ramiro earned $73,210 in 2020, how much did he pay for Social Security and Medicare taxes?

Financial Algebra Second Edition

Solution: Ramiro’s income was below the 2020 maximum taxable income of $137,700, so he paid Social Security tax on all of his income.

His Social Security tax for 2020 was $4,539.02. Find the Medicare tax.

His Medicare tax for 2020 was $1,061.55, rounded to the nearest cent.
To find his total Social Security and Medicare tax, add them together.

Ramiro paid $5,600.57 for Social Security and Medicare in 2020. He can verify that the government has these exact numbers in their files by requesting an annual Social Security Statement. This can be accessed at www.socialsecurity.gov.

Multiple Choice

Lisa made a total of x dollars last year, which was more than the maximum taxable income for Social Security for the year. The Medicare tax was 1.45%. Write an expression that represents what Lisa paid to Medicare last year.

• 0.0145x2
• 0.145x
• 0.0145x
• 0.014x

Multiple Choice

Ming worked three jobs in 2020. The total of her incomes was less than $137,700.

At QuickMart, she made $21,750. At the College Book Store, she made $16,354. At the Mail Depot, she made $23,145. Find the combined total of her Social Security and Medicare taxes.

(In 2020, Social Security tax was 6.2% of income up to $137,700. Medicare tax was 1.45%)

• $4,685.55

• $3,750.55

• $1,000.55

• $2,500.55

Financial Algebra Second Edition

Slide 11

Example 4:

In 1988, Social Security tax was 7.51%, to the maximum income of $45,000. If Grace earned $51,211 in 1988, how much Social Security tax did she pay?

Financial Algebra Second Edition

Solution:
Grace’s income, $51,211, is over the maximum taxable income of $45,000 for that tax year.

Grace’s Social Security tax for 1988 was $3,379.50.

This was the most anybody contributed to Social Security in 1988.

Even if you earned millions of dollars, this is the amount you contributed to Social Security.

Multiple Choice

In 1988, Ramona paid $2,853.80 in Social Security tax. What was Ramona’s taxable income in 1988? 

           (In 1988, Social Security tax was 7.51%, to the maximum income of $45,000)

• $10,000
• $20,000
• $50,000
• $38,000