(Answered) Replacement rate of preretirement income

Finance

Problem: Can someone show me the step to answering these problems? I have included the correct answers beside them but need to see the work on how to get them?

Assume the social security system earns a 2.5% real rate of return for an individual paying 15% payroll tax on a constant real annual $25,000 salary over a typical 40 year working life.

1.What will the annual retirement benefit be if we assume a retirement period lasting 20 years? The correct answer is $16,213.80

2. What is the replacement rate of preretirement income? The correct answer is 64.9%

3. What will happen to the annual retirement benefits and the replacement rate if early retirement at age 62 is taken?

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