Pastors typically work month-to-month with limited income, making saving for retirement challenging. Since there may be no other source of income other than church salaries, it’s essential that pastors save for retirement to ensure they have enough assets saved up in case they can no longer serve in ministry roles. Regardless, saving is vital so they will have adequate protection should something arise that prevents them from serving anymore.
Pastors investing for retirement can meet their future financial needs more securely while giving peace of mind that God has blessed them with resources He has bestowed them with. Many pastors choose to allocate up to 10% of their salary towards a retirement plan each month, which can then grow through investment returns over time to provide long-term income in retirement.
For many clergy, a 403(b) plan is their preferred retirement savings vehicle, offering unique advantages not found with other plans such as 401(k)s and traditional IRAs. A church can create one to allow credentialed staff members to save state and social security taxes on contributions while growing the funds tax-free and receiving a tax-free distribution from housing allowance at retirement time. Furthermore, clergy-focused providers may reduce administrative costs while giving access to experts in church retirement planning.
Pastors should consider setting aside savings in a personal retirement account such as a Traditional or Roth IRA for their own retirement needs, which allows them to invest in stocks, mutual funds, real estate investments and alternative investments such as hedge funds. Such accounts allow pastors to diversify their portfolio for greater longevity in retirement by spreading out income streams while decreasing risk.
Personal retirement accounts offer pastors greater control of their assets than traditional employer-sponsored plans like 401(k). Pastors can quickly adjust investment allocations as circumstances or the market change, or when their faith values change – for instance by investing in companies that support local community outreach or exclude any that engage in unbiblical practices.
No matter when the pastor plans on retiring, starting to prepare now can give them confidence that their retirement won’t become one of grief (1 Peter 5:9).