Should Pastors Opt-Out of Social Security?

Written by Darrell Mims on Jul 06, 2021 in Finance Management

Read Time: 5 minutes

For the purposes of this blog, retirement does not mean discontinuing doing ministry but rather doing ministry without a paycheck from an employer.  

Over the years, I have advised hundreds of ministers about their right to opt-out of social security within the first two years as a paid minister. 

I know firsthand the stories of ministers who opted out and never saved enough money for retirement. They were devastated by their circumstances and, more importantly, did not think about the consequences during their career. Some thought that their church would take care of them. However, there was no retirement plan, and the church just did not have the resources to help the retired minister. There were no social security or Medicare benefits. In the worst situations, the minister died, and the non-vested spouse had nothing, not even death benefits or the minister’s social security. 

The primary purpose for opting out of social security should be that in the capacity of a minister, you do not believe in receiving public assistance from the government. I have learned that most ministers who opt out do so because they do not want to pay the 15.3% Internal Revenue Service (IRS) self-employment tax.

Making the right decision is essential, and the choice should be made based on the criteria of religious reasons and not simply to avoid paying the tax. Since this is not always the case, let’s look at the effects of the decision.

Opt-in or opt-out of social security?

Suppose you are a minister who opts out of social security, and you do not have 40 quarters (vested ten years work equivalent) in a secular job. In most cases, you are not eligible to receive government social security or Medicare health insurance benefits at the specified ages. This means that right away, you need to be saving at least 15.3% of your total income (salary and housing allowance) into a retirement savings account. 

The reason for doing this is because, at some point later in your ministry, you will probably not receive a paycheck for working. You will need to save now to replace future income needed to live on during retirement from the missing social security benefits and your retirement savings account(s). You may also need to investigate other creative ways to create income.   

Opting out for religious convictions

When should you consider opting out of social security?

In the past, if a minister was:

  • Vested from previous secular jobs
  • Opting out for valid religious reasons
  • Planned to use sound financial stewardship principles

Then I recommended that they opt-out of social security, knowing that they were receiving a great benefit.

 Good financial stewardship includes:

  • Tithe the first 10% and give offerings to our Lord
  • Create and live on a budget to cover necessities, including:
    • Maintaining an emergency fund
    • Funding both short and long-term savings
    • Saving for retirement
  • Plan for seasonal gifts, vacations, hobbies, etc.
  • Eliminate all debt before retirement
  • Provide for health, life, and disability insurance
  • Leave a legacy for others

Some reasons it may make sense to opt-out without being vested in social security include:

  • You will be vested in the future by having a second secular vocation or business.
  • Your spouse is vested, and you will receive 50% of their social security benefits.
  • You are disciplined to save enough through your working years as a minister to cover these areas when you no longer have a paycheck:
    • what you would have made in social security
    • adequate retirement savings
    • an amount to cover your medical insurance 
    • out-of-pocket medical expenses

There are many other considerations about what is enough to live on in retirement and putting together a plan to reach those goals. If you would like to speak with a specialist about planning for retirement, please give us a call at 877-494-4655.

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The challenge has been providing recommendations about opting out to the following groups of ministers:

  • Younger ministers whose compensation is at an entry-level
  • Families with only a single wage earner 
  • Families with one or two wage earners who have debt and other financial obligations   

The 15.3% social security tax is a large obstacle to overcome. This is even true for older ministers. My experience has shown me that most ministers understand the need to start saving immediately. However, due to life circumstances or a lack of discipline, they cannot do so with the self-employment requirement.

Which decision is right for you?

1 Corinthians 4:2 says, “Moreover, it is required in stewards that a man be found faithful.” (KJB)

I believe, if you really have been called by God to be in ministry, then you will make the right decision concerning opting out regardless of your age or whether you are vested in social security. If you are making the decision based on your religious convictions, God will honor your decision. Remain faithful for what belongs to Him, and He in turn, will provide for you.

If you do not opt-out and you are a younger minister or a pastor with some financial challenges, you should follow the same stewardship recommendations I made previously.

God provides for each of us, which means we are responsible for stewarding what has been given to us. As we continue to grow and develop through our relationship with God, our circumstances will change, and we will have an opportunity to witness how God has made changes in our lives so that we can accomplish the plans He has for each of us. This usually means some sacrifice on the front end of the journey; however, I have heard many testimonies of ministers who were faithful in being good stewards, and God rewarded them with a fulfilling life. Jump on board. 

At StartCHURCH, we’ve helped thousands of pastors and ministers with opting out of social security and planning for their retirement. If you are ready to start planning for your future, our team of specialists would love to speak with you to help you make the right decision. Please give us a call at 877-494-4655 or click the link below to schedule an appointment so we can support you through the process.

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Blessings,
Raul Rivera


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