Biblically Responsible Investing – Navigating the Curves of Social Security 

By Doug Hanson 

Despite riding our bikes slowly uphill for 25 miles we still hadn’t reached the summit of Beartooth Highway in Montana. Our goal was another 10 miles away, but lightning, thunder, and a hailstorm rolled in, and we were done. We turned around and made haste back to the valley, taking advantage of the quick descent that going downhill offered. 

Charles Kuralt once called the Beartooth Highway the “the most beautiful roadway in America.” The Beartooth Highway climbs to a hard-to-breath 10,947 feet above sea level. Since its completion in 1936, the Highway has thrilled millions of visitors with its amazing views of one of the most rugged and wild areas in the lower 48 states. Like many mountain passes, the Beartooth Highway is a combination of curves and straightaways as it navigates the challenging Rocky Mountains terrain. 

We enjoyed riding down the mountain, but to successfully reach the valley we had to navigate the contour of the highway. Social Security can be like that. It can be an enjoyable ride for retirees, including nice straightaways, but there are curves in the road that we need to recognize. 

One Social Security curve you may have read about is that it will run out of money in 2033. That is somewhat deceiving. Social Security is funded through payroll taxes; both employer and employee pay a 6.2% Social Security tax on wages earned up to the taxable wage base. The taxes collected are invested in a trust fund, which will collect less in payroll taxes than it pays out in benefits by 2033.  After that date, scheduled tax income is projected to be sufficient to pay only 76 percent of scheduled retirement benefits – and this remains the picture for the next 75 years. The pressure on Congress is likely to build over the next few years to resolve the shortfall. Since 46 million retired Americans receive Social Security benefits, it is hard to imagine that Congress could avoid addressing the issue. 

Another curve is that we are limited in how much we can contribute to Social Security. We contribute to Social Security on the first $160,200 we earn annually. Wages earned above that are not taxed for Social Security and they don’t contribute to our future Social Security benefits. 

When we start collecting Social Security, there are more curves. We can start collecting Social Security as early as age 62 or as late as age 70. However, the longer we wait the higher our benefit. Also, if we start collecting before our Full Retirement Age (which is between 66 and 67, depending on our birth year), then we are subject to an earnings test. Assuming we continue to work while drawing Social Security, then some Social Security benefits are withheld if we earn over $21,240 annually. We don’t lose the benefits withheld, rather, they are suspended until we reach Full Retirement Age when they will be added on to our monthly benefits.   

Once we reach Full Retirement Age, we can earn whatever we want while collecting Social Security, but we may have to pay taxes on the Social Security benefits. The income formula for determining taxes to be paid is 50% of Social Security benefits plus other taxable income plus tax-exempt interest income. If that income exceeds specified limits, then Social Security benefits will be taxed to varying degrees. 

Social Security is blessed with straightaways, too. Once we start collecting Social Security, the amount we receive is increased annually to keep up with inflation. Plus, a spouse receives a spousal benefit when their working husband or wife starts drawing Social Security, and that spouse continues to receive a widow(er) benefit after they lose their loved one. Since people in the United States are living longer than ever before, Social Security can be a financial blessing for many decades, and that is a nice ride! “In his hand are the depths of the earth; the heights of the mountains are his also. The sea is his, for he made it, and his hands formed the dry land” (Psalm 95:4-5). 

Doug Hanson is an investment advisor with Christian Wealth Management in Boise, providing biblically responsible investment advice to Christians. For more information, visit investforthegloryofgod.com or contact him at [email protected] or (208) 697-3699. 

Investment advisory services provided by Creative Financial Designs, Inc. Securities are offered through CFD Investments, Inc., Member FINRA & SIPC. 2704 South Goyer Road, Kokomo, IN 46902, 795-453-9600. Christian Wealth Management, LLC is not affiliated with CFD Investments, Inc. or Creative Financial Designs, Inc.