December 20, 2017 Update: A final version of the tax reform bill has been passed by Congress. Find out how it will affect you here.
There you have it, shortest blog post ever.
But in all seriousness, this is an important matter that can make a huge difference during your retirement. If you didn’t take saving for retirement seriously during your early years, even just receiving a little help from the Social Security Administration could double your monthly income in retirement.
If it really is possible to still receive Social Security benefits after opting out, how does that work? Well, there are two ways:
It can be hard to save for retirement. Especially for pastors who need to because they’ve opted out of Social Security. A lot of big denominations have pensions, but what about independent pastors? Non-denominational pastors usually don’t have workplace retirement plans. That doesn’t leave them with much more than an IRA. Or does it?
If you’re reading this, you’re probably a licensed minister who has opted out of Social Security. I’ll bet you were thrilled at the opportunity to opt out of a system that is facing a perilous future and is quickly depleting its reserves. But was it really the right move for you? And are you maintaining your integrity by doing so?
If you are a church employee, you may have to file Schedule SE (even though you’re not self-employed) and pay double payroll taxes. This is why.
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.
This post breaks down all of the major types of income a pastor can earn and explains how the IRS treats them for Social Security, income tax, retirement plan and payroll tax purposes. It is based on IRS Publication 517.
As soon as they are licensed, many pastors jump at the chance to opt out of Social Security. Social Security taxes total 15.3% of a pastor’s salary, so opting out represents significant savings. However, there are certain benefits that Social Security provides that must be replaced if you opt out.
Licensed and ordained pastors and ministers receive special treatment by the Internal Revenue Service. One privilege they have is the opportunity to exempt themselves from our nation’s Social Security system. This is a step-by-step guide explaining exactly how to opt out of Social Security.