What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.
To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. You're nearly at full retirement age and still working. If you take Social Security benefits now, will they be reduced because your income's too high?
Hi, I'm Rob West. There's no sugarcoating it. The Social Security system is complicated. For example, how much can you make while receiving benefits? We'll go over the rules today and then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well under normal circumstances, you can begin receiving Social Security benefits anytime after reaching age 62. Some people must do that because they simply need the money, and that's fine. But we normally recommend that you hold off because your benefits will be permanently reduced by about 8% for every year you begin taking them before reaching full retirement age, which is now 66 or 67. Now one question that always pops up for folks making that decision whether to start Social Security benefits at 62 or wait until full retirement age is this. If I wait, how long will it take my greater monthly benefits to catch up on all the money I lost by not taking benefits early? And the answer is, on average, it'll take almost 12 years to recoup what you gave up by not taking benefits early. But once you reach that point at about age 79, you're then money ahead every month for the rest of your life. At this point you might be thinking, 12 years, that's a long time. What if I don't live that long?
Well the odds are actually in your favor once you reach age 65, at which point females are now living on average to age 86 or another 21 years, and males reaching 65, again on average, will live another 18 years to age 83. But of course, there's no guarantee that you'll live that long, and a lot of folks decide to start receiving their Social Security benefits early, that is, before full retirement age. And many of those people continue to work. So another question we get a lot is, if I continue to work after signing up for Social Security, how will that affect my benefits?
Here's how. If you make more than a certain amount from your work and haven't reached full retirement age, your benefits will be reduced temporarily. And here's why. Years ago, when people weren't living quite as long as they are today, there was less incentive to wait before taking benefits. So lots of people took their benefits at the first chance, and a good many of them continued to work while receiving benefits. So to reduce the number of folks doing that, and to help preserve the system, another rule was implemented in addition to the 8% penalty I mentioned earlier. This other rule limits the amount of money you can earn while receiving benefits, before your benefits are reduced.
I know that seems pretty harsh, but it's not as bad as you think, and I'll get to that in a minute. But first, here's how much you can make before having your benefits reduced. For the 2024 tax year, if you're already receiving benefits and continue to work, but will not reach full retirement age that year, you can earn up to $22,320. If you earn anything above that threshold, Social Security deducts $1 from your benefits for every $2 of income. If you're receiving benefits and you will reach full retirement age in 2024, you can earn up to $59,520 without having your benefits reduced. If you exceed that limit, Social Security will reduce your benefits by $1 for every $3 you earn above the limit. But only during the months before you reach full retirement age. Once you reach full retirement age, you can earn any amount of money without reducing your monthly benefits. So let's say your benefits are $9,600 a year or $800 a month. You continue to work and earn $60,000 in the seven months from January through July when you reach full retirement age.
So you're $480 over the limit. That means your Social Security benefits would be reduced through July by a total of $160, which is $1 for every $3 you earn above the limit. The $160 reduction would, in theory, be divided by the seven months prior to reaching full retirement age, so you would receive $770 a month instead of $800. Now the good news I mentioned earlier is that you will be reimbursed every penny that's withheld from your monthly benefit.
Once you reach full retirement age, those reductions will be added back into your monthly benefits until you catch up. So you're really not out anything. I know there's a lot to that, but I hope that helps to clear up some questions you may have had about this topic. All right, your calls are next, 800-525-7000.
I'm Rob West, and we'll be right back. Stick around. Have you downloaded the Faith Buy app yet? You need to do that today because this is going to make your life easier. Yes, you can manage your money through the in-app envelope feature, but also plan out future goals.
I want to buy a house in five years, and I'm on track to do that. Here's also what I like. You can connect with people around the country. It's like social media, but better. Ask a question, get an answer, and share what you're learning about money and investing. So why don't you grab your phone right now and download the Faith Buy app? If you enjoy this radio program, you're going to love all of the many different resources waiting for you at faithbuy.com and the Faith Buy app. You'll find powerful wisdom, free podcasts, articles, videos, and more from leading voices such as Randy Alcorn, Howard Dayton, Ron Blue, and our own Rob West.
Grow in wisdom and knowledge by connecting with a community of thousands of Christians striving to be good and faithful stewards at faithbuy.com or by downloading the Faith Buy app. Welcome back to Faith and Finance. I'm Rob West, your host. All right, it's time to take your calls and questions.
The calls are coming in, but we still, at least at this moment, have a few lines open. 800-525-7000 is the number to call. Again, that's 800-525-7000 you can call right now. Let's begin today in Florida. Hi, James. How can I help? Hey, appreciate you taking my call a lot.
Thank you. I am a pastor. I'm a pastor, and I have a tax question, and I'll paint the picture this way, and I think it'll make sense, I hope. So let's say I have a salary of $70,000. I'm able to claim a housing allowance of $20,000, which drops the taxable income down to $50,000. Am I still able, at the end of the year—I think it's doing the easy form for tax—am I still able to also claim the standardized deduction from the government, which is somewhere in the ballpark of $23,000, $24,000?
Well, yeah. So the bottom line is, yes, you can take the housing allowance, and that's separate from either the standard or itemized deductions based on which you qualify for. The housing allowance is excluded from federal income taxes. You still would pay FICA on it, but it's excluded from income taxes. But as you calculate your return, it will tell you whether or not you qualify for the standard deduction, which for 2023 would be $27,700 for a married couple. For 2022, it is, let's see, I believe, $25,900 was married filing jointly for 2022. So if you're under that, you would take the standard deduction on top of your housing allowance. If you're over that, not counting the housing allowance, then that's where you would itemize.
Okay, I'm going to make sure I have this right. And typically, we don't itemize, we just go with the easy form. So you said, could you just explain one more time what you just said about if you're at this or over, you would do this, and so on. I missed that whole thing.
Yeah, well, it's fairly simple. You can disregard the housing allowance because you're allowed the housing allowance, regardless of whether you take the standard or the itemized deduction, it's separate. So basically, if you're filing your 2022 taxes, if your deductions add up to less than $25,900, then you'll claim the standard deduction, because you would benefit better by taking that.
If your deductions, contributions, mortgage interest, anything that's deductible, if those not counting the housing allowance add up to more than $25,900 for 2022, then you're going to be better off itemizing each of those deductions so you get the full benefit. Does that make sense? Yeah, it makes sense. Yeah, it does.
So just in a nutshell, I think I've got it. If the housing allowance with that brings the taxable income down to $50,000, then that's a done deal, and then we start figuring the taxes based upon that $50,000 at that point. And then going to what you said, you'd be better to itemize if you can get beyond the standard deduction, but if not, just go with the standard deduction. That's exactly right, yeah, because that housing allowance is exempt from federal income tax, so that would be excluded as you calculate your adjusted gross income. And then separately, you would count up all your deductions and determine whether you're better off itemizing or taking the standard deduction.
Now, if you use a tax software to prepare that, I mean, as you enter in all these numbers, it will determine what the best option is for you, alternatively, and this would be what I would suggest as you get a CPA or a tax preparer to do that for you. Got it. Okay. That's all I need. Thanks, Rob. All right, James. Yes, sir.
God bless you. Thanks for calling today. We've got some lines open, 800-525-7000. We're looking forward to hearing from you today.
Let's go to Grand Rapids. Hi, Lori. Go ahead. Hi. Thanks for taking my call.
I just have a question. I left my long-time employer in the healthcare field last year, and I'm just wondering, my 403b is still held with the company that takes care of that through them. What are my options to move that to something else? Do I have to stay with like a Roth or do I have other options? Yeah. Do you know which type of 403b it is? Is it the traditional pre-tax version or the Roth after-tax version? It's the pre-tax. Okay.
Yeah. So your options are to either leave it there in the 403b even though you've separated from that employer and then continue to just have it invested with those mutual fund or investment options inside the 403b. The second option would be to roll it into a new 403b if your plan administrator allows and you have a new employer that offers one. Or the third option would be to roll it to an IRA.
And the idea there is you're not taking a distribution. You don't ever receive any of the money. It's going directly from the 403b plan administrator to the custodian of your new IRA. It gets deposited. That's a non-taxable event because it's staying inside the pre-tax environment.
And then inside the IRA, you or an advisor on your behalf could invest in basically anything at that point, you wouldn't be limited to the investment choices inside the 403b. Okay. That's what I was wondering. Okay. Thank you for the information. I appreciate it.
All right, Laurie. We appreciate your help. Listen, if you need an advisor to help you with that, we recommend the Certified Kingdom Advisor designation.
You can find a CKA on our website at faithfi.com and just click Find a CKA. Thanks for your call today. Well, folks, we're just getting started here on Faith and Finance, but looking forward to tackling your financial questions today. Again, we've got lines open. The number to call is 800-525-7000.
That's 800-525-7000. Let's tackle a quick email. This one comes from an anonymous listener who writes, I just opened a high yield savings account. I wonder if moving $50,000 from a local bank will raise any issues with the IRS. Basically, if you make a cash deposit of more than $10,000 in your bank account, banks are required to file Form 8300. It's the currency transaction report with the IRS and basically, it's a part of trying to root out any kind of financial fraud. It came as a result of the Patriot Act. It's composed of basically law enforcement and financial regulatory bodies from FinCEN, which is the Financial Crimes Enforcement Network.
This has been around a while. In your case, the IRS will see that it's a transfer from another bank and that should be the end of it. You wouldn't generally hear from them at all.
It's really just more to try to identify fraud taking place through large transactions. I would proceed full steam ahead with that $50,000 transfer and not give it a second thought. Thanks for writing to us. All right. We're going to take a quick break. When we come back, more of your questions.
It looks like we've got a few lines open. The number 800-525-7000, call right now. We are grateful for support from Praxis Mutual Funds. Praxis Mutual Funds has seven impact strategies that are designed to create positive real world change. More information is available at praxismutualfunds.com. The fund's investment objectives, risks, charges, and expenses are contained in the prospectus and summary prospectus. This and other information is available at praxismutualfunds.com. Investments involve risk.
Principal loss is possible. Foresight Fund Services LLC. As the leading advocate for the Christian financial industry, Kingdom Advisors serves the public by promoting the integration of a biblical world view across every aspect of the financial services industry. And we serve a growing network of thousands of Christian financial professionals, equipping and empowering them to carry biblical financial wisdom to their clients, peers, and community. For more information, visit kingdomadvisors.com. That's kingdomadvisors.com. Welcome back to Faith and Finance. I'm Rob West.
This is the program where the 2,300 verses on money and possessions found in God's Word intersect with today's financial decisions and choices. The number to get in on the conversation, 800-525-7000. That's 800-525-7000. All right, back to the phones we go to Fort Lauderdale.
My homeland, I guess you could say, is where I was born and raised. Anthony, great to have you. Go ahead.
Hi there. Thank you for taking my call. I have a question in regards to selling a property, I have a rental property, and if I sell it, do I have to, first of all, do I have to pay capital gains, and if I do, can I take some of the funds from the sale of the house to pay off the house, my residence, my current home? Yeah, have you already sold the property? No, I'm thinking about selling it in a year and a half to two years. I see.
Okay, very good. Yeah, so the two options you've got here, if it's not your primary residence, it would be subject to capital gains, so basically you'd take the selling price minus the original purchase price minus any improvements that you made that stayed with the property and improved the value, and what you'd be left with is your capital gain, and as long as you held it for more than a year, then for most people with income, if you're married filing jointly between $80,000 and $450,000, you're going to be in a 15% capital gains rate, and then you would pay that capital gains regardless of what you do with the money, whether you stick it in savings, turn around and invest it in stocks and bonds, or use it to pay down your primary mortgage. The only way to avoid that capital gains would be if you either A, give a portion of that property away, like for instance to a donor advised fund prior to the sale, and you could give a portion of the property, you wouldn't have to give the whole thing, but if you were going to do some charitable giving out of it, you could give it to the donor advised fund, then sell it, and that portion of the sale would not be subject to capital gains. The other option is to do what's called a 1031 exchange, but that would be where you'd identify a like-kind property, so another investment property, and you'd have to declare your intention to roll that money into another property within 45 days and then close that transaction in 180 days.
But you may not be wanting to buy another piece of property, and if so, then you just pay the capital gains, and then at that point you're free to do whatever you want with the proceeds. Okay. Well, that's great. I appreciate your comments, and thank you very much. You're welcome, Anthony. Thanks for your call today.
Takokomo, Indiana. Hi, Eva. Go ahead. Hi.
Thank you. My husband and I are in our early 50s. We're still working. We have a nice retirement plan, and we don't have any debt. We have an emergency fund, but we're wondering about mutual funds to fund things that we might want to do 5, 10 years from now.
Yeah. So you believe the retirement savings that you've accumulated, that plus Social Security is enough to cover your bills in the future. You're just wanting to save outside of that for some specific goals? Yes, and goals, we're hoping to start paying on some things.
We have a house that we're wanting to rebuild on the inside, and we'd like to cash flow it. Okay. And our goal is to start that somewhere between 5 and 10 years from now. All right. And do you have that money set aside today, or would you be building that up over the next 5 to 10 years? We'd be building it up over the next 5 to 10 years.
We think we can save around $1,000 a month. Yeah. Okay.
Well, it's a good question. So if you've got a 5-year time horizon, you're right on that bubble where you could go either way in terms of, do you just go ahead and lock it up in a 5-year CD and take 4.5% for the next 5 years and be happy with it? The problem is, you've got this money on a monthly basis, it's not like you have it today. So the other option is you could dollar cost average into a mutual fund. Now, could it be lower than it is today, 5 years from now? Probably not.
I mean, it's possible. Certainly a much greater likelihood that you'll do better on it and outpace inflation over a 10-year period. And the nice thing is, with the dollar cost averaging, you're taking advantage of those sell-offs along the way. So it's not like you've got quarter of a million dollars, you're dropping in the market today and then all of a sudden we hit a recession and that quarter of a million is 190 a year from now and you're frustrated with yourself. And I think the thing here is, you'd have to keep that time horizon, stay focused on the 5- to 10-year time horizon, but given that your dollar cost averaging into the market every month, you're buying at the various points along the way. So if the market is down, let's say we're in a bear market a year from now because we're in a recession, you're buying more shares with that same $1,000 a month.
You'll do well. So I like that option. I think then the key is, okay, which mutual fund do you put it in? Because you don't want to buy individual stocks given the amount of money you're talking about.
And you've got a couple of options there. You could use what's called a robo-advisor, which is a very low-cost indexed approach. So you'd go to Betterment or the Schwab Intelligent portfolios, you'd answer a series of questions and then you would set up, every time you made your contribution of $1,000, it would automatically reinvest into the mix of indexes that are appropriate for your age and risk tolerance and there's not any transaction costs. So it's very low-cost, it might cost you in total maybe one quarter of 1% a year, which is pretty modest. And then you just capture the broad moves of the market.
If you wanted to be a little more hands-on, you could pick a mutual fund with a money manager who's trying to beat the market and you could do that with traditional mutual funds or you could do it with faith-based investing mutual funds where they're only investing in companies that wouldn't be misaligned with your values but where they're seeking to create value for the shareholders by making an impact in the world. Either one of those options would be available to you as well. But I think the bottom line is, just kind of given what you're describing here, I kind of like the idea of you dollar-cost averaging systematically every month into some sort of mutual fund along the lines of the options I described.
How does that sound though? Okay, that sounds good. We're hoping to work maybe close to 70, so we're hoping we'll be healthy. Well, it's a very simple solution for you and I think you could absolutely accomplish what you're looking for here.
So I'd probably head to Betterment or the Schwab Intelligent portfolios if that sounds like a good option. Hey, all the best to you guys, Eva. Thanks for calling today. We appreciate it. I know we're almost out of time, but I wanted to let you know that you don't ever have to miss a program. Just download our Faithfi app for your mobile device and take us with you anywhere. Thanks for joining us today. I look forward to talking with you again next time on Faith and Finance. Faith and Finance is provided by Faithfi and listeners like you. Thank you.
