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Ministers face different set of retirement hurdles, helpscomment (0)

August 29, 2013

By Carrie Brown McWhorter

Rodney Hagan has a better understanding than most about the financial challenges that those in ministry face. As a senior accountant with Kemp & Associates in Anniston, he works with many churches and pastors, especially during tax season. 

Hagan also serves bivocationally as the pastor of Old Hopewell Baptist Church, Heflin, in Cleburne Baptist Association, and he appreciates the need for ministers to be good financial stewards of the resources God provides in both the short and long term.

In the short term, a minister’s primary financial concerns are the same as other working Americans — budgeting income for food, housing, transportation, clothing and other necessities. But while many other professions have retirement plans in place for their employees, churches — especially small or rural churches — often do not. As a result, the responsibility of planning for the long term, especially retirement, lies solely in the pastor’s hands.

For those in the ministry, discussions about money can be very uncomfortable, but Hagan believes God expects the church to provide for those He has called into ministry.

“In Scripture, we see Paul’s example. When he was going around setting up the churches, he solely depended on the churches to take care of him so he could do the work of the Lord,” Hagan said. “The more a church can take care of a pastor, the more the pastor can take care of the church.”

According to the GuideStone Financial Resources publication “Ministerial Tax Issues,” most ministers have a dual tax status, reporting their church salary as an employee but reporting other ministry-related income, like money earned by performing weddings and funerals, as self-employment income. However, those pastors who must report their entire church salary as self-employment income often find that without careful planning, taxes can claim a big part of that money, Hagan said. 

“A self-employed individual is taxed according to their regular tax bracket plus the self-employment tax rate,” Hagan said. 

A pastor whose family falls into the 28 percent tax bracket, for example, must pay that rate plus an additional 15 percent self-employment tax plus state taxes — resulting in nearly 50 percent of that pastoral income going toward taxes.

Itemizing unreimbursed expenses can reduce the tax burden for ministers, which is why Hagan recommends to his clients that they keep a planner in their car visor to record all ministry-related mileage and expenses. He also recommends seeking professional advice for tax planning and preparation in order to take advantage of all the deductions available to ministers. 

Freeing up income in the short term can make it possible for a minister to make longer-term plans, including plans for what GuideStone President O.S. Hawkins calls “vocational retirement.”

“Ministers by and large see themselves working until they’re called home. That’s perfectly understandable, since nowhere do we read in the Bible where the Christian minister is to ‘retire’ from his calling or his service to Christ and the Church,” Hawkins said. “It is true that most of us must retire vocationally; this does not necessitate our retiring from Christian service.”

Even if pastors plan to continue their ministry after retiring from full-time service, they may have to consider issues that secular employees do not. Housing is one such area, since a pastor living in a parsonage will need to save additional funds to provide housing for his family. 

The goal at GuideStone is to help clients develop a plan that will allow them to retire from vocational church ministry with security and dignity, Hawkins said. By helping ministers plan for vocational retirement, “we will help unleash upon the world the greatest force of volunteers on mission the world has ever witnessed. That way, the latter years of our lives and ministries can become our most productive ever,” he said.

The biggest challenge is to make sure a 50- or 60-year-old does not arrive at retirement unprepared, Hawkins said. The best advice for ministers in the early years of their service is to save whatever they can, even if they do not have much to invest.

“Any little bit, even if you don’t have much, will help in the future,” Hagan said. 

In the latter years of their vocational service, the advice for ministers is the same as for those in any other career — to be saving as much as possible and investing appropriately. Just as with tax preparation, retirement planning requires qualified professional advice to maximize retirement benefits, Hawkins said.

There are short-term benefits to the long view as well, Hagan said. 

“A pastor gives so much of himself to the church, and at the end of the day, the pastor appreciates it when the church says, ‘You may not be here when you retire, but we want to be sure you are taken care of in the future.’”

For more information about retirement planning through GuideStone Financial Services, visit www.guidestone.org.

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