The 403-b family of plans is the most advantageous of retirement plans for pastors.  For the following reasons a 403-b is more beneficial than an IRA:

• The contribution limits are higher.

The contribution can be up to 100% of income with a 2026 maximum of $24,500 per year ($32,500 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.

• You do not pay SE tax on 403-b contributions.

The church/employer makes the deposit (which can be from salary or in addition to salary) directly to the 403-b and the amount deposited is exempt from tax, including the self-employment tax.  Monies contributed to an IRA can be exempt from federal income tax but NOT self-employment tax.

• Distributions can be designated as housing allowance.

Once you begin to receive distributions from your 403-b (generally when you retire) the distributions can be designated as housing allowance.  Then any amounts you use to pay housing expenses would not be taxable.

**Special Ages 60–63 Catch-up $11,250 (Additional salary reduction contributions which replace the age 50 or over contributions for ages 60, 61, 62, and 63). At age 64, the catch-up drops back to the lower age 50 amount.

Questioning where to go to establish a 403-b?

In summary:

You pay self-employment tax on contributions you make to a traditional IRA.  You pay federal income tax on distributions. You pay self-employment tax and federal income tax on contributions you make to a Roth IRA. You never pay taxes on 403-b contributions.  You pay no taxes on 403-b distributions that are used for housing expenses.  You only pay federal income taxes on 403-b distributions which are NOT used for housing expenses.