What about the church’s stewardship in caring for the pastor?

  1. When possible, the church needs to get the pastor into his own home.  The first pre-requisite of retirement is to have a home paid for at retirement.  (Not to ignore the security issue, privacy, longevity and tax advantages which are also benefits to owning his own home.)
  2. The church should help him fund his retirement plan with the goal of his receiving 80% of his take home pay from Social Security and his retirement plan at retirement.
  3. To accomplish the above he needs to begin funding his retirement as early as possible, it should at least begin by age 40 with $4,000 per year, increasing annually to meet the desired results.  If he has opted out of Social Security his plan needs to be more aggressive.
  4. The 403-b family of plans is the most advantageous of retirement plans for pastors.  The contribution can be up to 100% of income with a maximum of $22,500 per year (30,000 if he is age 50 or older).  In addition, if he has been in the ministry for 15 years, he can add a $15,000 lifetime make-up at a maximum rate of $3,000 per year.  The distinct advantages of the 403-b are the church makes the deposit (which can be from salary or in addition to salary), the amount deposited is exempt from the self-employment tax, and the distributions are eligible for the housing allowance at retirement.  Pastors should not be in IRA’s and rarely Roth IRA’s.

Answers to Common Questions:

  • I recommend the 403-b plan because IRA’s do not have the characteristics for pastors as does the 403-b.  That is the Social Security tax savings and the housing allowance feature explained in “4” above.
  • I am not aware of any disadvantages to the 403-b pension plan.
  • The 403-b can be invested into the same vehicles as any pension plan.  Bonds, stocks and etc. an experienced broker will counsel you based on your objective.
  • The 403-b catch-up is for pastors who have been in the ministry for 15 years (not necessarily with the same church).  The lifetime catch-up maximum is $15,000, the annual catch-up maximum is $3,000.
  • Contributions to the 403-b pension plan must be made by December 31 of the year in question.  Whereas an IRA contribution can be made up to April 15th of the following year.
  • The Roth IRA should only be used by pastors who have opted out of Social Security and pay no federal income tax, or by pastors who are maximizing their 403-b contributions and want to set aside an additional amount.

Stewardship principles require each of us to be responsible with the resources and families he has entrusted to our care.  A suggested procedure is to assign two board members to review the needs of the staff annually and make recommendations to the full board for consideration.  When it comes to our pastors, we should take I Corinthians 9:14 and I Timothy 5:17 very seriously.  Good planning can prevent the kind of sad experiences that occur far too often in the lives of these precious servants.

Attention: Tax Law is subject to interpretation. Please be advised that the material contained on this Web site is for information only and is not intended to be a substitute for professional legal advice. The Stewardship Services Foundation endeavors to update the information on this site on a regular basis, but cannot guarantee its accuracy at all times.