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14 November, 11:33

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?

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  1. 14 November, 11:54
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    Wage Replacement Ratio = $53,000 / $100,000 = 53%

    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%
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