What You Need To Know About Social Security Even If You’ve Opted Out


Many pastors don’t have a solid understanding of how Social Security works and don’t think they need to because they have opted out. However, there are some things everyone should understand about Social Security, even pastors.


A little over a year ago, an insurance company called MassMutual surveyed 1,513 people to find out how well Americans understand Social Security. You probably won’t be surprised that only about 30% of respondents were able to pass with 7 out of 10 correct. In fact, only one person out of the whole survey was able to answer everything correctly. I took it and got one answer wrong. Try your hand at the survey to see how well you do. 


Most people don’t know a lot about how Social Security works and many pastors think they don’t need to because they have opted out. That is a big mistake. Even if you have opted out, you may be eligible for benefits and need to understand how the system works.


What Is Social Security?

Social Security is a safety net program enacted in 1935. It is a way by which society, through the government, financially assists older Americans, disabled workers, and families in which a spouse or parent dies.


Social Security was never designed to be a complete retirement program. On average, retirement benefits only replace about 40% of a worker’s income. Most retirees need at least 70% to maintain the same lifestyle.


How Does Social Security Work?

Social Security is not a savings program, where a worker gradually saves for retirement, like a 401(k) or IRA. As workers pay into the system, that same money goes out immediately in the form of benefit payments to others. The system is designed based on the assumption that there will always be enough workers contributing to cover the benefits that need to be paid out.


Who Is Eligible?

Eligibility is based on “credits” earned. Forty credits are necessary to be eligible for retirement benefits, and you can earn up to a maximum of 4 credits a year. Therefore, you have to pay into the system a minimum of 10 years to receive retirement benefits. Right now, one credit is earned for each $1,260 of wages, so you have to make at least $5,040 to earn the maximum credits. The numbers are adjusted every year due to inflation. Young people need fewer credits to be eligible for disability and survivors benefits.


How Are Benefits Calculated?

Retirement benefits are calculated based on your highest 35 years worth of wages. If you have less than 35 years, zeros are averaged in for the missing years. When you begin to receive benefits also affects the amount you will get. You can elect to receive retirement benefits any time between age 62 and 70, but the longer you wait the higher your payment will be. Your actual benefit will be adjusted periodically for cost-of-living increases.


You can set up an account online at ssa.gov to see your earnings history and estimated benefits. Their estimates are made assuming that you will continue earning at the current rate in future years. Unless you are retiring today, the numbers you will see are just estimates and can change. The closer you are to retirement, the more accurate the numbers will be.


Can You Still Receive Benefits If You’ve Opted Out?

Even if you have opted out of Social Security you can still receive benefits. If you have enough non-ministerial wages to have earned 40 credits, you will be entitled to benefits. Also, if your spouse has earned at least 40 credits you will be eligible for spousal benefits, which are up to half of the working spouse’s earned benefit.


Real Life Example

Let’s take a look at some real life numbers. I started working at 16 and stopped at 28 to raise a family. The numbers would look pretty similar if you started working at 16 and then became a licensed minister and opted out of Social Security at age 28, so I will use my own numbers as an example.


Earnings History

My work history shows that I paid into the system for 13 years. My benefit is calculated based on my top 35 years, so my average annual income over that period is currently $5,325. That’s not a whole lot. If I started a side job today and earned $8,000 a year for the next 22 years I could almost double my Social Security retirement benefit.

example social security earnings history

Estimated Benefits

Based on my current earnings history, these are my estimated benefits. Note that there are different estimated retirement benefits depending on when I begin receiving them. They are calculated based on life expectancy so that someone who lives the exact life expectancy for their age will receive the same total amount whether they begin early or wait for a larger payment.


Also, even though I am not currently in the workforce, I am eligible for disability benefits. This would be very helpful if something happened to me and I needed help taking care of the kids.

example social security estimated benefits


How It Affects Pastors

Why does this all matter to pastors? Well, you may not realize that you worked outside the ministry enough to be eligible for benefits even after opting out. It’s good to know if Social Security disability payments are an option if something happens to you.


Or what if you have 9 years’ worth of non-ministry work? Earning a few thousand on the side could push you over the line and make you and your family eligible for benefits. That could be huge if you’re nearing retirement age and haven’t saved.


It is important to know where you stand in regards to Social Security eligibility because a few small moves now could make a big difference for your family later in life.


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