Being financially prepared for retirement is simply a function of time and money. What is the biggest excuse ministers use when they are not saving for retirement? They say they need every penny to pay their bills now, but they'll start saving once the bills are paid off.
Most ministers cannot save a fortune by the time they reach retirement. On a minister's pay, it is difficult to squirrel away as much as many experts insist is needed for a comfortable retirement. But the truth is the sooner you start saving the better.
The best advice for ministers is stated by author Michael Martin. Put as much into a 403(b) tax-sheltered annuity plan as possible. Consider these two special benefits for ministers.
Prior to retirement, all nonelective and elective employer contribution to a 403(b) plan is excludable for income and Social Security tax (SECA) purposes. For a minister who has not opted out of Social Security, this means an immediate 15.3% tax savings on monies contributed to a 403(b) church plan.
The minister's housing exclusion is one of the great tax benefits available to ministers. it gets betters because, after retirement, a minister can take distributions from their denominationally-sponsored 403(b) retirement plan as part of an ongoing housing allowance.
In addition to a tax-sheltered annuity plan, there are other retirement vehicles for ministers. A non-qualified deferred compensation arrangement. The invested funds are held as an asset of the church with a corresponding liability reflected for an amount held. The church can't use these funds, but they will be available to creditors if the church becomes insolvent.
In general, the more time the minister has, the more aggressive he or she can afford to be in an asset allocation strategy.
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