Clergy Finances: Pastor Retirement Options

Throughout their careers, people will often begin preparing and saving for retirement, this is true for pastors as well. At some point in time a pastor will no longer be able to work on a full-time basis but just like everyone else, will need some form of financial compensation to ensure quality of life for him and his family.

These options may or may not be similar to more traditional workers’ options but just like when it comes to pastors taxes and clergy finance, pastor retirement options are still just as effective albeit slightly more non-traditional.

SIMPLE or Roth IRA’s

A SIMPLE IRA is a sponsored plan for organizations that have less than 100 employees and is an ideal retirement savings plan for small employers that don’t currently have a retirement plan. With this type of IRA, the church and the pastor contribute. Pastors can also open their own Roth IRA. The maximum annual contribution to a Roth IRA is $5,000 and pastors over the age of 50 can contribute up to $6,000 annually.

Social Security

Pastors are given the option of social security exemption.  If pastors oppose receiving government support for doing religious work they can ask for an IRS exemption from paying Social Security taxes. If a pastor does opt out of Social Security they are required to have a health retirement plan in effect and must be able to set aside income for retirement on their own. Even if a pastor does receive Social Security, it still may not be enough to retire with. In this case having secondary savings plans are vital.

When saving for retiring, financial planners recommend that pastors as well as non-pastors save four to eight times the household’s peak annual earning so that they can retire with the same standard of living that they were used to pre-retirement.


403b options are common for non-profit organizations and churches. It is similar to a 401k but more flexible. Many churches prefer a 403b.

Other Considerations

A pastor will often live in a church parsonage, a house provided to the pastor by the church. Once a pastor retires the church must also consider how the pastor’s relocation will be handled. As part of a pastor’s retirement compensation, pastors may need access to a severance amount so that they can purchase a new home, outside of their former parsonage.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing