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What is Financial Planning for Pastors?

by Friday, June 6, 2025
Picture of Amy Artiga from Guide Financial Planning with blog post title: What is Financial Planning for Pastors?

Recently, I explained to you what financial planning is. Just like pastoring is a whole lot more than just preaching, financial planning is a whole lot more than just investments. If you haven’t read that article, I would recommend reading it here before continuing on. 

I gave an overview of the different areas of financial planning in that article and now today we will do a deep dive and look at some examples of how that plays out for pastors and the strategies that we use that are unique to people in your position. Let’s start with the clergy housing allowance. That’s an easy one, right? Just maximize it and save on taxes? Not always. Let me show you how a financial planner approaches these things.

Housing Allowance

Sometimes maximizing your housing allowance can actually cost you money. Take, for example, the child tax credit. A portion of the child tax credit is refundable, meaning the government gives you the money even if you don’t owe any taxes. However, the refundable portion is limited by your taxable income. Claiming a lower housing allowance increases your taxable income and your refundable credit. In this manner, you can actually end up ahead by lowering your housing allowance.

Your tax preparer isn’t going to tell you this, though. Their job is to report your numbers accurately, not help you strategize and plan for the future. That’s what a financial planner does. A good planner understands the interplay between the child tax credit and the housing allowance and will help you calculate a housing allowance amount that allows you to maximize the benefits of both. 

Charitable Giving

One thing I know about pastors is that you are incredibly generous. Not just because you’re laying down your life and the potential for a more lucrative career for the church, but you tithe. You give to missionaries. You support children in Guatemala. You help finance church plants. Those are all things that can be tax-deductible if you itemize your deductions. Unfortunately, hardly anyone itemizes their deductions with the current standard deduction. When you claim the standard deduction, you don’t get a tax benefit for charitable giving. While your treasure in heaven is increasing, your tax bill is staying the same. 

There are strategies for getting a tax benefit for your current level of charitable giving, even if you usually claim the standard deduction. You can utilize a bunching strategy and donor-advised fund. These things get a little complex, but a financial planner can walk you through it as if they do it every day. Because, well, they do.

Retirement

What about retirement? Thinking about retirement is one of the most common things that inspires people to look for professional financial help. What does a financial planner do that an online retirement savings calculator and an account-rebalancing robo-advisor can’t do? Strategize. Apply the tax law to you personally. Help you understand your trade-offs and weigh them before making a decision. 

Where to Save for Retirement

If you’re young and starting out, the internet will tell you that a Roth IRA is the best place for you to save for retirement. But if you’re a pastor, there’s a good chance that’s not true. Even if you have to pay higher fees in your 403(b). A financial planner who understands clergy taxation will help you analyze your options to see which type of account is best in your specific situation.

Housing Allowance in Retirement

The generic advice is to roll your 403(b) account into an IRA when you retire. However, if you read this blog, you know that leaving your money in your 403(b) makes it eligible for the housing allowance in retirement. But should you leave all your money in your 403(b) or move some of it out? That can only be determined by a financial planner addressing your unique situation, not this blog. 

You see, it might be best to move some of the money from your 403(b) into an IRA. You can only claim a housing allowance as long as you, the pastor, are alive. Your spouse can’t claim a housing allowance after you die and your heirs cannot claim one either. Everything in your 403(b) will be taxable once you are gone. Depending on your situation and the costs and investments available in your 403(b), you might want to move some of your money.

Qualified Charitable Distributions

Once you reach age 70 ½, you can do something called a Qualified Charitable Distribution (QCD) from an IRA where you send a check directly from the IRA to a charity and it completely bypasses your tax return. It is never reported to the IRS and does not count as taxable income. If you’re planning on making charitable donations in your later years, this is a great way to do it. 

QCDs can only be made from an IRA, so it might be best in your situation to move some of your 403(b) into an IRA for charitable purposes. The money still comes out tax-free and you lower the balance of the 403(b) that your spouse or heirs may have to pay taxes on. Remember, we never know when God will call us heavenward and it’s all taxable after that. 

Roth Conversions

Another way to minimize taxes from your retirement accounts is through Roth conversions. This is where you move money from a traditional pre-tax account to an after-tax account by paying taxes on it in the current year. You may have some low-income years, perhaps after you retire and before you start collecting Social Security benefits or while you take time off to go to seminary and live off of savings (so much better than student loans!). If your income is lower than the standard deduction, then you can convert the difference from a traditional account to a Roth IRA completely tax-free. It may even make sense to convert some of the account at a 10% or 12% tax rate if you think that your taxes will be higher in the future. 

How I Can Help

How do you know how to balance keeping money in your 403(b) for the housing allowance and rolling it into an IRA for QCDs or converting it to a Roth? Work with a financial planner! If you wanted to figure this stuff out yourself, you would have been a financial planner instead of a pastor. Tax strategies just don’t excite you the way that saving souls and helping people does. 

The thing is, tax strategies actually excite me. It’s a little embarrassing because it proves that I’m a total nerd, but it’s true. Since I’m into this stuff, I figured I might as well embrace it and use my nerdiness to help people like you. So I became a financial planner. 

Yes, I don’t just write this blog, I am a financial planner. I am state-registered to provide investment and financial advice to individual clients. The best part is, I don’t work alone. I’m part of an amazing team at Guide Financial Planning, so if you work with me, you’ll probably get to meet some of them too.  

If you’re looking for professional help, our team at Guide Financial Planning would be honored to have the opportunity to serve you. You can schedule a call with this link so we can get to know you, tell you more about ourselves, and see what the future may hold for us. 

PS – While I love pastors, I’m trained to work with the sheep as well. If you know any nice ones looking for financial help, go ahead and send them my way. My team and I would be honored to serve them as well.

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What is Financial Planning?

by Friday, June 6, 2025
Picture of a financial planning meeting with blog post title: What is Financial Planning?

When I tell people I’m a financial planner, they usually say something like, “So you do investing?” Most people think that financial planning is managing people’s stock and bond investments and some think it involves selling insurance. But it’s not that at all.

It’s just like when you say you are busy and people say, “Well what do you actually do besides preach on Sunday? What could possibly keep you busy Monday through Friday?” Sometimes that makes you want to smack your forehead or curl up into a fetal position and cry out, “Why, Lord?” Doesn’t it?

That’s because you are not a preacher, you are a pastor. Your job is to shepherd the people of God into Christlikeness and preaching is just a tiny part of that. If all you did was preach, the vast majority of the people under your care would not get to where God wants them to be. Your job is so much more than just preaching. It is counseling, studying, investing in your own relationship with God so that you are in a position to lead, coordinating volunteers so that people’s needs can be met, developing discipleship programs, training small group leaders so that more people in the church can receive one-on-one care, reviewing financial statements and making decisions so that you have a place to meet and staff to meet people’s needs, etc. You know that you could add a whole lot more to that list. 

Just like preaching is only a small part of pastoring, investments are only a small part of financial planning. Let me tell you what else there is.

Financial Planning is a Process

First of all, financial planning is a process. That’s why you add the -ing because it’s an ongoing process. There is a difference between a financial plan and financial planning. Financial planning is a holistic process of recognizing what matters to you in life and figuring out how to apply your finances to help you get from where you are to where you want to be. My job as a financial planner is to help people understand and manage their finances in a way that aligns with their values and moves them towards their goals. 

One misconception I had getting into this field is that a financial planner is supposed to tell people what to do with their money. My introduction to the financial world was through Dave Ramsey, so that makes sense. However, I’ve learned that my job is not to tell people what to do. My job is to analyze people’s finances and then educate them on their various options and the consequences of each. My job is not to make decisions for people but rather empower them to make their own decisions with confidence. The process of financial planning is ongoing because life is always changing and there are always new options, priorities, and decisions to be made. 

Financial Planning Vs. A Financial Plan

Now, at my firm, we offer both financial planning and financial plans. The difference is that while financial planning is ongoing, like discipleship, a financial plan only addresses where you are at one moment in time, more like a one-time counseling session. A financial plan looks at every area of your financial life (we’ll go over them below) and fits them all together like a puzzle in order to create the personalized picture that you want for your life. 

We always start everyone with a financial plan, but then each person gets to decide what they want to do moving forward. For some, the financial plan is enough of a foundation where they can take it and do their own financial planning going forward. Others decide that they want to work with us on an ongoing basis so they have someone to keep them accountable, bounce ideas off of, and help them navigate their ever-changing life and complex financial landscape. 

The Components of Financial Planning

If it’s “so much more than investing,” what do a financial plan and financial planning entail?

Goals

It starts with your goals. Do you ever get in the car and start driving without knowing where you’re going? I know some people might, but to me that’s ludicrous. You have to start with the end in mind in order to know what steps to take to get there. Financial planning is the same. Do you want to be able to serve a low-income church? Do you want to be financially independent by age 50? Those are very different goals and the same person would end up with completely different financial plans depending on which one they wanted to achieve.

Cash Flow

Getting a handle on how much money you have coming in and how much money you have going out is the foundation of a financial plan. If you don’t know how much money you have, you don’t know what you have to work with to help you achieve your goals. It’s like when you cook from a recipe. You need to make sure you have all of the ingredients on hand, otherwise, it won’t work no matter how great the recipe looks. You need to plan your meal based on the ingredients you have on hand or go out and get more ingredients! So, the first step in financial planning is checking your pantry (or your income and spending) so you have a good idea of what you have to work with.

Financial Independence/Retirement Planning

One of the most common reasons people seek professional financial help is that they are thinking about retirement. Either they are younger and want to make sure they are doing what they need to in order to be able to retire someday, or they are getting close to wanting to retire and want to know if they can afford to. Even if you never want to retire, like me, it’s important to plan for a season of life in which you may not be able to earn an income. You never know when your health will fail or you’ll need to care for a loved one full-time or something else like that. As such, retirement or financial independence planning is a very important part of a financial plan. 

Investment Planning

Finally, investments! While they aren’t everything, investments are an important part of a financial plan because they help fund your goals. How well you do your investing affects how soon you’ll have the money necessary to achieve those goals. Whether your goal is retirement, a college education, or purchasing a home, it’s important to make sure that your investments align with your needs. 

What is your time horizon; do you need the money in two years or twenty? What is your risk tolerance; how much of the stock market’s ups and downs can you stomach? How much are you actually paying for your investments and how will that affect the amount of money you end up with? Good financial planning doesn’t stick you into a one-size-fits-all investment model or product, but rather provides concrete advice based on proven principles and your own personal financial and emotional needs. 

Protection Planning

I mentioned earlier that some of us don’t want to retire and saving for retirement is more of a defensive move. Well, there are some other defensive moves that you will want to take as well. You see, it’s just as important to watch your back as it is to charge forward with your financial life. One incident could completely derail a great plan or completely wipe out all of the gains that you worked so hard for. 

That’s where insurance comes in. Insurance protects you from the things that would keep you from moving forward. It doesn’t actually move you forward financially (no one likes paying premiums when they feel they get nothing in return) but it keeps you from going backward. Some of the protection we touch on in financial plans are emergency funds, life insurance, health insurance, disability insurance, long-term care insurance, homeowners or renters insurance, auto insurance, and umbrella insurance. 

Tax Planning

Usually, optimizing your finances means minimizing your taxes. Taxes can be a major drain on your income, so every area of your financial life, from the kind of retirement account you invest in to the type of investments you have in each account to how you do your charitable giving, needs to be viewed through a lens of not just how to minimize your taxes today, but how to minimize them over your entire lifetime. 

Charitable Giving Planning

God has called us to be generous givers. Some of that giving can help us save on taxes. If charitable giving is a part of your life (as I suspect it is), then your financial plan should also address strategies for maximizing the tax benefits of the charitable giving that you already do. 

Real Estate Planning

Now we’re getting into the sections that aren’t in every financial plan because they don’t apply to everyone. However, if owning a home or rental real estate is in your future or part of your current reality, then it needs to be addressed in your financial plan. This is especially important for pastors because you are eligible for the clergy housing allowance, which can save you a lot in taxes. Because of the expertise I’ve developed with this blog, I get brought in on every financial plan our firm writes for a pastor to ensure that they are optimizing their housing allowance and not leaving any money on the table. 

Education Planning

If you have kids that you want to send to college (or you want to go yourself), that needs to be a part of your financial plan. How much should you save? Where should you save it? Is there anything else you can do to avoid student loan debt? Those are all questions that financial planning should address. 

Debt Planning

Speaking of student debt, what do you do once you have it? With so many different repayment plans available, there are financial planners out there who specialize in working specifically with student loans. Your financial plan should include a plan for when and how your debt (of all kinds) will be paid based on your personal financial situation and priorities.

Estate Planning

Estate planning is a topic that needs to be addressed in a financial plan though the bulk of it belongs to lawyers. Financial planners cannot write wills or other estate planning documents, but it’s our job to help you see the importance of having those documents in place and making sure all of the beneficiary designations on your various accounts actually align with your final wishes. 

I just listed eleven areas of financial planning. And that’s not all there is! If you’re planning a large purchase, like a car, that should be included in your financial plan. If you have a special needs child, caring for them should be included in your financial plan. Parents that you’re responsible for? That needs to be in your plan as well. The above areas are the most common to each plan, but the areas that a plan addresses are as varied and countless as the people they are written for. 

I hope this gives you a clearer picture of what financial planning is. Don’t feel bad if you didn’t know before. Most people don’t know because it’s such a new profession. It was birthed out of insurance sales and stock brokering, so it isn’t any wonder most people think it’s all about investments and life insurance. Let me tell you, if that’s what it was, I wouldn’t be doing it. 

While financial planning does deal with numbers, the true focus is the client as a person with a specific and unique call of God on his or her life, and the numbers are simply a means to an end. In fact, I have heard it said on more than one occasion that financial planning is like secular pastoring. (Though at my firm we don’t keep it secular!)

Read here to learn about how financial planning applies specifically to pastors and some of the strategies we use at my firm.

If this article has made you curious about the firm I work for and our approach to financial planning, check out our website. Schedule a free introductory phone call if you think you’re ready to do your own financial planning with us.

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6 Principles that Transform a Pastor’s Financial Life

by Monday, May 26, 2025
Picture of a plant growing out of cracked, dry ground with blog post title: 6 Principles that Transform a Pastor’s Financial Life, by Amberlee Rich

As a PK and a personal finance coach, Amberlee Rich has a heart for helping pastors and the church steward their resources to further God’s kingdom. She and her husband, James, developed Steward Lab, an online coaching program for churches, the Steward Lab Podcast, and their 1-on-1 coaching business, Rich Living Coaching.

There’s an unrealistic expectation out there that pastors need to have their lives perfectly put together. Yet, we all know that we’re sinners, and far from perfect. Many people expect that their pastor is good with money. However, statistics reveal that around 40% of pastors experience financial stress, and many are struggling to meet their basic needs (Center for Stewardship Leaders, 2019). Many pastors are struggling financially and don’t feel like they can openly share that with people in their congregation. 

After coaching forty pastors on their personal finances for multiple years, we’ve been able to see what’s really going on inside the lives of pastors throughout America. The reality is that no two situations are the same, but there are many common themes that we do see. Overall, there are six principles that we’ve seen transform pastors’ financial lives.

1. Recognizing the importance of Biblical stewardship. 

The concept of Biblical stewardship is easy to agree with and much more challenging to live out. If answering honestly, most pastors would say that this is an area they need to grow in. It’s countercultural and challenging. 


When anyone fully embraces the concept that what we have is a gift from God, everything changes. Psalm 24:1 says, “The earth is the Lord’s, and everything in it, the world, and all who live in it.” What we have belongs to God, and we’re stewarding His resources.

We are responsible for using the resources and gifts we have to further God’s kingdom, and that means we have to be intentional. Ignoring or passing financial responsibilities to your spouse is not the answer. When a pastor takes Biblical stewardship seriously, a ripple effect occurs in the congregation.

2. Getting your personal finances in order will reduce stress and burnout. 

No one becomes a pastor for the money, but many pastors leave the profession because of it. Approximately 70% of pastors report feeling overwhelmed by their financial situations, leading to burnout and the need for second jobs (Jerichohill, 2021).

Many of the pastors I’ve worked with have second jobs, so they can make ends meet. The problem then lies in sustainability. How long can a pastor work part-time at a church (usually clocking in full-time hours), have a second job, and have a family? This can be very challenging and requires intentionality. Pastors need an incredible financial defense to lower their expenses, pay off debt strategically, and invest for the future. Maximizing housing allowance helps pastors pay less taxes, making their income go further. 

3. Plan for the future. 

Many pastors we work with are just trying to survive right now; they’re not contributing to retirement, and many have opted out of Social Security.

No matter where you’re at financially, don’t put off planning for the future. You need to be prepared, and the earlier you do so, the better. Time is a massive component when investing. By preparing for the future, you’re able to release your position at the right time, instead of holding onto it out of necessity. 

4. Being a positive example matters. 

Many of the pastors I’ve worked with admit that they’ve avoided and deflected questions and comments about money because they didn’t feel qualified to answer or respond appropriately. So many of the pastors I’ve worked with have deep-seated guilt and shame around money. Therefore, they avoid preaching about it and helping others in this area.

A recent survey found that only 25% of pastors felt qualified to discuss financial issues in their sermons (J.D. Roth, 2024). But once a pastor becomes equipped and feels like they’re being good stewards, they start sharing about this sensitive topic.

5. A culture of generosity doesn’t happen naturally; it has to be cultivated. 

If you want to encourage your congregation to be generous, you have to be generous yourself. Research indicates that churches with generous leadership see a 20% increase in overall giving (Center for Stewardship Leaders, 2019).

Generosity needs to be communicated, encouraged, and practiced. And if the people in your congregation are living paycheck-to-paycheck and are super stressed about money, generosity will be a challenge. This is why it’s so important to be equipped and provide resources to help your congregation be a generous people as God has called them to be and to be good stewards of all their resources.

6. Money needs to be talked about in churches. 

Jesus didn’t shy away from this topic. The challenge here is to talk about money without it feeling like the church is trying to get something out of it. This is a reason why many pastors shy away from bringing up the topic.

But providing resources to your congregation can not only help the people in your church trust God with their money more, but it will also help your congregation to be less stressed, have better marriages, have more free time to serve, free up money to give and serve others, and the list goes on.

By openly talking about money, your church will become more sustainable and will likely be able to have a greater impact. This will help you be able to continue the work God is calling you to do. Plus, studies show that churches that address financial literacy report higher levels of congregant satisfaction and engagement (J.D. Roth, 2024).


Overall, when a pastor gets their personal finances in order, they’re less stressed, not as likely to burn out, more present, and feel more equipped to help the people in their congregation. Don’t try to pretend that you have your personal finances in order if you really don’t. Getting help isn’t a sign of weakness, it’s a step towards being intentional with all the resources God’s given you. 

Remember, you don’t have to do this alone. Sharing your financial transformation with honesty and vulnerability will help others in your congregation feel validated and heard. And as a personal finance coach, I’ll leave you with a few questions to ask yourself. Don’t skip this. This is where transformation happens.

Take some time to reflect on these questions:

  • In what ways am I avoiding or neglecting my personal finances? Why?
  • If I were intentional with my personal finances, how would this help me? My marriage? My family? My congregation? Etc. 
  • What is one small change I’m going to make today to become a better steward of the resources God has given me?

If you’d love to have some 1-on-1 help on your personal finances or would like to connect with us to get Biblical stewardship resources into your church, schedule a free call. 

What’s the difference between a financial coach and a financial planner or advisor? If you’re looking for help budgeting, paying off debt, or just getting a handle on your day-to-day finances, then you will want to work with a financial coach. If you want help with strategic tax planning, investing for the future, or making sure you have the proper insurance coverage in place, then you will want to work with a financial planner. 

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What Should You Do If You Don’t Have The Money To Pay Your Taxes?

by Monday, April 14, 2025

Your 2024 taxes are due tomorrow. That means an envelope with your check has to be postmarked by midnight on April 15, 2025. Or you’re late. 

What if you owe money you don’t have? Maybe you calculated things poorly. Or you didn’t realize you were supposed to be paying quarterly self-employment taxes. You owe, but there isn’t enough in your bank account to pay the bill. What do you do?

File Your Return Anyway

First of all, FILE YOUR TAX RETURN ANYWAY. Yes, I put that in all caps on purpose. It’s that important. Why? It’s bad enough that you can’t pay your taxes, but not filing your return is double-bad.

Penalties

You see, the IRS has two different penalties related to this. One is for not filing your tax return and the other is for not paying your taxes. Filing your tax return is a free and easy way to get out of one of those penalties, even if you don’t have the money to pay your taxes yet. 

If you don’t pay your taxes on time, you are subject to a penalty of 0.5% of the amount due for each month (or part of a month) that you are late, up to a maximum of 25%. So, if you owe $1,000 on April 15 and don’t pay it until June 4, then your penalty is $10 (0.5% x 2 months x $1,000). In addition to the penalty, the IRS will charge you daily compounding interest as well. 

What happens when you decide not to file your return until June because you know you won’t be able to pay until then? You will be subject to the IRS failure-to-file penalty on top of the failure-to-pay penalty. The failure-to-file penalty is 5% of the taxes due per month (or partial month), with a maximum of 25%. That means instead of just your $10 failure-to-pay penalty and interest in the previous example, you would have to pay $100 for not filing on time (5% x 2 months x $1,000). For returns over 60 days late, the minimum failure-to-file penalty is the smaller of $435 or 100% of the tax required to be shown on the return. 

Extension To File

Basically, FILE YOUR TAX RETURN even if you can’t afford to pay your taxes yet. The failure-to-file penalty is ten times the failure-to-pay penalty. There’s really no excuse not to do it. However, if you do have a really good excuse, I’ve got a backup plan for you. The IRS offers a free, six-month extension to file your return each year. 

You have to ask for the extension, it is not automatically granted. All you have to do is file Form 4868, which is really easy, and you’ll have an additional six months to avoid the failure-to-file penalty. Taxes are still due on the regular deadline, so you’ll still end up with a failure-to-pay penalty. But that’s so much better than having to pay both penalties!

Communicate With The IRS

Now that you’ve filed your return to avoid the 5%-per-month failure-to-file penalty, what do you do? If you know you’ll be able to pay your bill in the next couple of months, then go ahead and wait until you have the money and pay the bill. If it won’t be that easy to clean up, you need to get on a payment plan with the IRS. 

You see, the IRS’s goal is to collect all the tax money that is owed. They aren’t interested in teaching you a lesson or shaming you or punishing you and making you suffer. They just want their money. If you are forthright and communicative, they will work with you to develop a payment plan. When you get on an installment plan with the IRS, they even cut your failure-to-file penalty in half to only 0.25% per month. 

Of course, if you stick your head in the sand and refuse to acknowledge your tax liability, it can get ugly. The IRS has the power to clean out your bank accounts without warning and without prior legal action. You don’t want to go there. Just act like an adult and talk to them about it. I’m sure you’ll be able to work it out.

Make Sure It Doesn’t Happen Again

“The definition of insanity is doing the same thing over and over again and expecting different results,” is a popular quote commonly misattributed to Albert Einstein. While I don’t know that I’d go so far as to call that insanity, it still doesn’t reflect well on your wisdom and judgment. We’ve talked already about what you should do right now about your tax problem. But what are you going to do going forward so that it doesn’t happen again?

The answer to what to do to avoid this dilemma in the future will depend on how you got into this mess in the first place. Maybe you need to adjust your employer’s tax withholdings. Maybe you need to start paying quarterly estimated taxes. Maybe you need to work with a professional tax preparer.

One thing for certain is that you probably need to build up some emergency savings. Yes, an unexpected tax bill counts as an emergency and justifies dipping into your savings. But you can only dip into savings during an emergency if you have savings. 

The first step is to live on a budget. Don’t know how to make a budget? Read this article. Having trouble with your budget? This article might help. Once you get your budget going, the next step is to spend less than you make. Those two things are not only the keys to avoiding this problem in the future, but they are the foundation of biblical stewardship and wise money management. They are essential. And, once you are using a budget and spending less than you make, you will be able to build up emergency savings for such a time as this.

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The Great Tax Benefits of 403(b) Plans for Pastors

by Monday, March 17, 2025
Picture of Nate Skelly, CFP, with blog post title: The Great Tax Benefits of 403(b) Plans for Pastors

This is a guest post by Nate Skelly, CERTIFIED FINANCIAL PLANNER™ professional and founder of Financial Pathway. He is passionate about providing financial education from a biblical worldview. Nate lives in the Tampa, FL, area with his wife, Charity, and their three kids: Jaden, Judah, and Juliet.

You know what they say about things that sound too good to be… they usually are! But let me assure you, if you’re a licensed, ordained, or commissioned minister, this article is worth 10 minutes of your time!

The bottom line is this: if you are a pastor and you are not contributing to a church-sponsored 403(b) you are likely missing out on thousands in tax savings over the coming years.

Understanding the Church-Sponsored 403(b) Plan

A 403(b) plan is similar to a 401(k), but it is only available for nonprofits.


One key advantage is that church-sponsored 403(b) plans don’t have to follow the fairness rules that apply to 401(k) plans. These rules are meant to ensure retirement plans don’t favor higher-paid employees too much, but they can create a lot of extra paperwork and restrictions. Since churches are exempt from these rules, they have more freedom to design a retirement plan that works best for their staff, without worrying about complicated tests or limits. Additionally, 403(b) plans tend to be a lot easier to set up and manage on an ongoing basis.

Image

Image source: Mint/Intuit


The Housing Allowance Advantage

Licensed, ordained, or commissioned ministers can designate a portion of their income as a housing allowance. This allowance, up to certain limits, is not subject to federal income tax. 

For example, if a pastor earns $60,000 per year and his church designates $20,000 as housing allowance, only the remaining $40,000 is subject to income tax. Not only does it lower the pastor’s overall tax bill, it also makes him more likely to qualify for certain income-based benefits.

By the way, if you are not already utilizing your housing allowance or unsure if you are able to, speak to your church and your tax professional right away!

But it gets better…

Housing Allowance in Retirement

Most pastors don’t know that housing allowance can extend beyond their employment years. Even in retirement, pastors can still claim housing allowance on withdrawals from their church-sponsored retirement accounts. This is a huge benefit!

For example, let’s say a pastor’s housing allowance retires and his church designates his housing allowance amount at $24,000/yr. This means that for his first year of retirement, he would be able to claim up to $24,000 of withdrawals from his church-sponsored 403(b) account as housing allowance and pay no income taxes (or Social Security and Medicare taxes) on those withdrawals. Even though he is no longer being paid by the church, he is withdrawing funds that were set aside in a church-sponsored retirement plan so he is still able to claim housing allowance on those funds.

Keep in mind that any withdrawals above the housing allowance amount would be subject to ordinary income taxes. 

Making the Most of the Tax Benefits

It’s important to note that the tax benefits only apply to church-sponsored retirement accounts. If pastors have funds in IRAs or 401(k)s from previous secular jobs, a pastor is not able to claim housing allowance on those withdrawals. However, if a pastor made contributions to an IRA with money earned from his religious duties, he can transfer those IRA funds into a church-sponsored 403(b) account and gain the ability to claim housing allowance on those funds during retirement!

Triple Tax Advantage

By utilizing the housing allowance provision and contributing to a church-sponsored 403(b) plan, pastors can potentially achieve triple tax advantage: 1. contributions are income tax deductible 2. the growth of the funds inside the 403(b) is tax-deferred  3. withdrawals can be tax-free if designated as housing allowance within the allowed limits. So it is possible for a pastor to not pay any income taxes on his retirement savings at all!

This makes the church-sponsored 403(b) an even better vehicle than a regular IRA or even a Roth IRA.

Additional Tax Benefits

Contributions made by pastors to their 403(b) accounts also come with another perk. They are exempt from paying Social Security and Medicare taxes on those contributions. Considering that pastors are classified as self-employed and responsible for both the employer and employee portions of these taxes, this exemption can lead to significant savings.

Hypothetical example: a pastor is in the 22% income tax bracket and pays 15.3% Social Security/Medicare tax on his income. 

If he contributes $5,000 to his 403(b) account he is saving 37.3% ($1,865) in taxes!

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Hypothetical example based on a pastor in the 22% income tax bracket.

Contribution Limits

The contribution limits for church-sponsored 403(b) plans are higher than those for traditional IRAs or Roth IRAs. As of 2025, pastors can contribute up to $23,000 per year from their paychecks. Additionally, churches have the option to contribute to the pastor’s account as well. For 2025, the combined limit of employee and employer contributions is $70,000/yr!


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Image source: thecollegeinvestor.com



On top of that, if you are age 50-59 or 64 or older, you can contribute an additional $7,500/year as a catch up contribution raising your individual limit to $31,000. Important note: beginning this year, if you are age 60-63 you can do an even higher catch up contribution of $11,250 raising your individual limit to $34,750. 

While most pastors and churches will not come anywhere close to the yearly contribution limit it can be very useful in certain situations.

For instance, let’s say a pastor is getting ready to retire soon. He may want to increase his 403(b) contributions to “front load” his retirement and build up more tax-free income for later on. 

Perhaps a church wants to give a substantial gift to a pastor in honor of an anniversary, or maybe it wants to give a lump sum ahead of retirement. Instead of cutting a check directly to the pastor (which would then be immediately taxable), the church may choose to contribute to his 403(b) plan instead and help the pastor save substantially on taxes.

Conclusion

The special tax provision for pastors through church-sponsored 403(b) plans offers unparalleled benefits. By maximizing the housing allowance provision and taking advantage of the triple tax advantage, pastors can save a significant amount on taxes and enjoy tax-free withdrawals in retirement. 

If you have questions about setting up a 403(b) plan for your church, you can schedule a quick phone call with Nate here. 

Important reminder: always consult with your tax professional when considering any of these steps. This is not tax advice, but rather areas of potential tax savings that you should be aware of.

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Should You Keep A Mortgage Just For The Housing Allowance & Mortgage Interest Deduction?

by Monday, February 3, 2025
Picture of a family home with blog post title: Should You Keep A Mortgage Just For The Housing Allowance & Mortgage Interest Deduction?

Keep your mortgage so you don’t lose your housing allowance and mortgage interest deduction!

How many times have you heard that advice? A reader recently asked me about it. Is that really good advice?

I know for most people, keeping a mortgage just for the mortgage interest deduction doesn’t make financial sense (though a lot of people do it). But you pastors have an amazing benefit in the ministerial housing allowance. It made me wonder, could the housing allowance be enough to turn the tables and make a mortgage worthwhile?

Example Mortgage

I decided to calculate it out to see for myself and to share with you. Here are my assumptions for this exercise:

Home Price: $200,000

Loan Amount: $160,000 (20% down payment avoids private mortgage insurance)

Mortgage Type: 30-year fixed rate

Mortgage Interest Rate: 5%

Income Tax Rate: 12%

Based on those assumptions, I calculated out the amount you would save in taxes with the housing allowance and mortgage interest deduction as well as the total amount of interest you would pay over the life of the loan.

I also looked at the opposite extreme, paying cash for the house, but that’s not a very realistic alternative for most people. Because of this, I figured out what the numbers would be if you made bi-weekly payments. The idea behind biweekly payments is that you make a mortgage payment every other week instead of monthly so by the end of the year you’ve made an extra payment, 13 instead of 12. Here are the numbers:

Calculations

Minimum Payments

Annual Principal & Interest Payments: $10,306.98

Total Interest Paid Over Life Of Loan: $149,209.25

Loan Paid Off In: 30 Years

Bi-Weekly Payments

Annual Principal & Interest Payments: $11,165.96

Total Interest Paid Over Life Of Loan: $121,723.99

Loan Paid Off In: 25.25 Years (I rounded it to 25 for my calculations)

No Mortgage

Annual Principal & Interest Payments: $0

Total Interest Paid Over Life Of Loan: $0

Loan Paid Off In: 0 Years

Now, there are a lot of other things that count towards the housing allowance besides just principal and interest payments. You have property taxes, homeowners insurance, utilities, furnishings, etc. However, those are all the same regardless of whether or not you have a mortgage. Here we are only looking at the effects of a mortgage, so those are the only numbers I included.

Here is how total loan costs compare between the three situations:

30-Year Fixed RateBiweekly PaymentsPay Cash
Total Interest Paid$149,209.25$121,723.99$0
Tax Benefit Of Housing Allowance*$37,105.13$33,497.88$0
Mortgage Interest Deduction**$17,905.11$14,606.88$0
Cost of Loan***$94,199.01$73,619.23$0



*Tax Benefit Of HA calculated as 12% of annual principal and interest payment multiplied by the duration of the loan.

**Interest Deduction calculated as 12% of the total interest paid.

***Cost Of Loan is calculated as the total interest paid less the tax benefit of the housing allowance less the mortgage interest deduction.

Other Factors To Note

There are other factors that will affect how this would apply to you personally:

  • You have to itemize your deduction to receive a benefit for paying mortgage interest. Since the Tax Cuts & Jobs Act passed in 2017, most people do not itemize and receive this benefit.

  • Being in a lower tax bracket will decrease your tax savings and a higher tax bracket will increase them. For 2025, the 12% rate applies to singles with a taxable income of $11,925 – $48,475 and married couples with a taxable income of $23,850 – $96,950.

  • Having a lower interest rate will decrease the overall cost of the loan and a higher one will increase the cost.

  • Your housing allowance is limited by the fair market rental value of the house. If it is less than your biweekly payments then you will not save as much in taxes as in my calculations above.

  • What retirement income sources do you have? You don’t want your entire net worth tied up in your house, especially in retirement. It’s a lot easier to buy groceries and pay your bills with withdrawals from an IRA than it is to pull equity back out of your house. I have seen firsthand the pain and suffering it can cause to have a paid-for house but no cash in retirement.

What About Opportunity Costs?

So, if you took out this mortgage you would save $55,010.24 in taxes over the next 30 years. That’s great! Except that it will cost you $149,209.25 in interest. That’s essentially giving the bank $3 in order to avoid giving the government $1. Without a mortgage, you may pay more in taxes but you pay less overall.

Those calculations make paying off the mortgage as fast as possible the clear winner. But, as with most things financial, it’s not quite as simple as that. There are opportunity costs involved. An opportunity cost is basically what you miss out on by not making another choice.

You see, ditching your mortgage is obviously best if you’re just going to be spending or sitting on your money. But, what if you invest it? What if you put $160,000 into the stock market when you got your mortgage? Would you still end up worse off financially 30 years later?

Not necessarily. If you invest your money rather than pay off your mortgage you may end out ahead. It’s a possibility, though, not a guarantee. The end results will depend upon your discipline, the investment decisions you make, and the way the market behaves.

What Should You Do, Then?

Wouldn’t life be easy if the internet could just tell you the best decisions to make about everything?

I’m sorry, but I’m not God, so I can’t tell you what’s best in your situation. I can only suggest things to think through as you make your decision:

  • Consider your priorities; how does your desire to be debt free compare with your desire to maximize your finances?
  • Consider your habits; would you have the discipline to invest your extra money instead of spending it?
  • Consider your risk tolerance; do you have the guts to keep your money invested even if the market tanked?
  • Consider various scenarios; what rate of return do you need in order to make investing instead of paying down the mortgage worthwhile for you? 5%? 8%? 12%? Is your required rate of return realistic?

Remember, the math clearly shows that giving $3 to the bank to keep $1 from the government is unwise. However, you may have other opportunities that make giving $3 to the bank worthwhile. Talk to your spouse, pray through it, do the math, and I wish you the best of luck!



If you would like professional help, I offer financial planning services through Guide Financial Planning. You can learn more about the services we offer here or schedule a free introductory phone call here.

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Tax Preparation for Ministers: Reader Referrals

by Tuesday, January 28, 2025
Picture of tax forms with blog post title: Tax Preparation for Ministers: Reader Referrals

Clergy taxes are incredibly unique in a complex tax system, so it can be hard to find a tax preparer who actually understands how they work. I’m always getting requests for referrals, so I turned to my readers for help. These are the tax preparers that my readers have recommended. I have not personally worked with any of them and have done no research or due diligence, but they each have at least one happy pastor client.

The only way to get on this list is to be referred by a client. If you are a tax preparer that wants to be on this list, have one of your clients reach out to me. Also, if you reach out to someone on the list and find that they are no longer serving pastors, please let me know and I will update it. 

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How To Calculate The Clergy Housing Allowance

by Monday, November 11, 2024
Picture of a calculator with blog post title: How To Calculate The Clergy Housing Allowance
Purchase The Complete Guide to the Clergy Housing Allowance by Amy Artiga



The following is an excerpt from my book, The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance:

Calculating

By now you understand who is allowed to take a clergy housing allowance and the process by which you can do so. But here’s the big question everyone has: how do you know how much of a housing allowance to request?

First of all, there are limits to the amount of housing allowance that the IRS will allow you to claim. Your maximum allowed housing allowance is the least of:

  • the amount actually used to provide or rent a home;
  • the fair market rental value of the home (including furnishings, utilities, garage, etc.);
  • the amount officially designated (in advance of payment) as a housing allowance; or
  • an amount that represents reasonable pay for your services.

That means that even if your mortgage payment is $2,000 a month, if you could only rent the home (furnished, with utilities) for $1,500 your housing allowance has to be the lesser amount. 

Remember that those services only include ministerial services. If you are a bi-vocational minister, you can only claim a housing allowance from your ministerial income. If your expenses can justify it, though, you could claim your entire ministerial income as a housing allowance and use your secular income for all of your other expenses. Also, it doesn’t matter how you are paid for your ministerial services. Whether it’s hourly or salary or by W-2 or 1099 does not affect the housing allowance.

To determine your housing allowance, you should calculate both your anticipated expenses and the fair market rental value of your home and request the lesser amount. When calculating anticipated expenses, it is wise to include an extra 10% or so to cover things that come up unexpectedly, like a new crib or repairing termite damage. 

Some pastors regularly request the fair market rental value of their home even when it is higher than their anticipated expenses to ensure that they maximize the exclusion. The risk with this is that if your expenses are significantly lower, you will have to add the excess to your taxable income when you file your return and could end up owing a lot of taxes. 

Also, retirement account contribution limits are often tied to income. Claiming a higher housing allowance reduces your taxable income and could unnecessarily limit the amount you can save for retirement in a tax-advantaged account. Usually, by the time you realize your taxable income will be higher (because you didn’t use the whole allowance), it’s too late to put more into retirement. 

For families with children, the housing allowance can affect your child tax credit. Part of the child tax credit is refundable, which means the government will give you the money even if you don’t owe any taxes. However, the refundable portion is limited to a percentage of your income. If you erase too much income with the housing allowance, you could eliminate your refundable child tax credit and miss out on thousands of dollars. You’ll have to play with the numbers to find the right amount of housing allowance to claim to maximize all of the tax benefits available to you. 

When calculating your expenses, make sure to include any large purchases that you have planned for the year, such as a new refrigerator or deck. If you live in a parsonage or other church-provided housing, only calculate those expenses that you, yourself, pay for. You can’t claim an exemption for something that the church is paying for. That’s lying, and we all know who the father of lies is. For a worksheet or online calculator to determine your housing expenses, visit https://pastorswallet.com/free-resources/.

Purchase The Complete Guide to the Clergy Housing Allowance by Amy Artiga
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Two Things That Every Young Pastor Needs To Know About Finances

by Monday, September 30, 2024
Picture of a young pastor with blog post title: Two Things That Every Young Pastor Needs To Know About Finances

Because I specialize in working with pastors, I’m always on a quest to get inside pastors’ heads. In order to serve you effectively, I need to understand your world, your needs, your wants, and your struggles. I do this in many ways, such as discussions with my financial planning clients, emails I receive from my readers, and the comments in our Pastor’s Wallet Online Community.

I have noticed a common theme among the struggles that pastors face and the regrets that they have regarding their finances. There are two things that I hear over and over again that pastors wish they had known or paid attention to. So, young pastors, if you can only do two things, these are the ones you should do. Forget all my blog posts about maximizing the housing allowance and doing your taxes. These two things will be the foundation of your success in every other area of your financial life:

1. Stay Out Of Debt

As Proverbs 22:7 says, the borrower is slave to the lender. Jesus said in Matthew that you cannot serve two masters. Can you really do all that God has called you to when you are under obligation to your creditors? What if he calls you to something that doesn’t provide enough money to make your monthly payments? When you’re in debt, you’re working to serve your creditors. You gave them your word that you would.

And I don’t think God will free you from your creditors supernaturally just so you can do what he had planned for you. God believes in keeping his word and he expects us to do the same, even if it enslaves us. I think he is more concerned with your character and your keeping your word than the work that he has prepared for you. That can wait. He has all of eternity; he’s in no hurry.

I’m sorry to preach at you like that, but this is serious business. Debt can handicap you for a lifetime. Let’s say you put $2,000 on a credit card because you had to go to your best friend’s wedding. Or your computer died and you needed a new laptop to write your sermons. Or you finally got your own place and needed a couch. It could be anything, everyone seems to find a way to put $2,000 on a credit card.

Credit cards usually have a minimum payment of 2%-5%. Right now, the average interest rate for a new card is 23.18%, so we’ll use that with a 2% minimum payment for our calculations. If you pay $40 a month (2% of $2,000), do you know how long it will take you to pay off that little $2,000 credit card balance? One hundred seventy-seven months. That’s over 14 years! On top of that, you’ll end up paying over 3 ½ times as much with over $5,000 in interest. If you don’t believe me, have at it with this calculator.

Remember, that’s only a $2,000 credit card balance. Most people carry a lot more debt. How about $50,000 in student loans? Or an $18,000 debt on a car worth $8,000? Like I said, debt can handicap you for a lifetime. It’s really hard to get ahead when you start out so far behind.

2. Save For Retirement

And your goal is to get ahead. Get ahead of your monthly expenses so that you can put some aside for retirement, when you cannot work any longer. This is the second major area where pastors struggle and fail. 

Retirement saving is important for everyone, but no one more so than pastors who opt out of Social Security. At least I can depend on the government to give me a couple thousand dollars a month when I can’t work anymore. I won’t be living in extreme poverty even if I don’t save anything. But if you’ve opted out of Social Security? You don’t even have that to fall back on. 

What I see a lot is young people who put off saving for retirement because they think they will have plenty of time and money to take care of it later. After all, they are just starting out in their career, saving up to buy their first house, about to have a baby. They think that it will be easy to start saving once they get past that stage. 

But it isn’t. Kids eat more the bigger they get. And then they want to do soccer lessons. And then they break an arm. And then they want to go to summer camp. But you’re still a pastor, so you haven’t gotten a raise in ten years, in spite of inflation.

There is no easier time to start saving for retirement than when you are young. When you’re young and fresh out of college, at least you still think ramen is a full meal. Keep living like a college student so that you can avoid debt and start saving for retirement. 

Otherwise you’ll wake up one day in your mid fifties and realize that you have nothing saved for retirement. You’ve worked for decades and have nothing to show for it financially and you worry that you’ll never be able to retire, even if you get sick. That is depressing and overwhelming, which is why I’m telling you this now.

Avoid debt.

Save for retirement.

These are the big rocks of your financial life. The things that you should prioritize. Make sure to do these two things and everything else will fall into place around them. No financial trick like a tax-exempt housing allowance or extreme couponing is going to make much of a difference if you’re $50,000 in debt and have nothing saved for retirement.

Now is the time to take action to avoid future regrets. 

What do you think? What are one or two pieces of advice do you wish someone had given you when you were first starting out in the ministry? Let us know in the comments.

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A Pastor’s Guide to Navigating a Salary Conversation

by Monday, August 26, 2024
A Pastor’s Guide to Navigating a Salary Conversation by Ted Miller of Guardian Wealth Management

This is a guest blog post by Ted Miller of Guardian Wealth Management. Ted was a pastor for 25 years and now operates a 403(b)(9) retirement plan for churches. 

Salary discussions can be sensitive, particularly for pastors who must balance financial needs with spiritual and communal responsibilities. Engaging in these conversations with a church board requires a thoughtful and strategic approach to ensure that both parties feel heard and respected.

The very first concern is for a pastor to evaluate and address their own insecurities. Without pride it is good to recognize one’s strengths and without shame to clearly see one’s weaknesses. In this evaluation, I have found it to be very helpful to engage the help of a friend or trusted advisor. For many years I had another successful pastor that would come to my church and provide coaching for our staff and board. This friend would help all of us to dream bigger and would inevitably help the board to think about the need for a regular salary evaluation. In the spirit of confident humility, I offer these guidelines for an effective salary conversation.

1. Prepare Thoroughly

Before approaching the board, gather all necessary information to support your case. This includes:

  • Market Research: Understand the standard salary range for pastors in similar-sized churches or geographical areas. Resources like the National Association of Church Business Administration (NACBA) or similar organizations can provide valuable benchmarks.
  • Church Finances: Review the church’s financial status, including income, expenditures, and budget forecasts. Be prepared to discuss how your salary fits within the overall financial health of the church.
  • Personal Contributions: Reflect on your accomplishments and contributions. Document specific achievements, such as growth in membership, successful programs, or community outreach initiatives, to illustrate the impact of your work.

2. Choose the Right Time

Timing is crucial in salary discussions. Ideally, bring up the topic during the board’s budget planning sessions or during annual review periods. Avoid times of financial difficulty or when the board is focused on urgent issues.

3. Frame the Conversation Positively

Approach the discussion with a positive and collaborative mindset. Instead of framing it as a demand, present it as a mutual benefit. For example:

  • Express Appreciation: Start by acknowledging the board’s support and the church’s mission. Highlight your commitment to the church and its vision.
  • Share Your Perspective: Explain how your role has evolved and how it aligns with the church’s goals. Emphasize your dedication to the church’s growth and community impact.

4. Present a Well-Reasoned Case

When discussing salary, be clear and specific:

  • Justify Your Request: Use the information you’ve gathered to explain why an adjustment is warranted. Present comparisons with similar positions and demonstrate how your salary aligns with your responsibilities and contributions.
  • Be Transparent: Discuss the current financial situation openly. If the church is facing budget constraints, suggest a phased approach or alternative compensation options, such as additional benefits or professional development opportunities.

5. Listen and Engage

Engage in a two-way dialogue:

  • Seek Feedback: Invite board members to share their perspectives and concerns. Understanding their point of view can help you address any objections and find common ground.
  • Be Flexible: Be prepared to negotiate and consider alternative solutions. If the board cannot meet your salary request immediately, discuss potential future adjustments or other forms of compensation.

6. Follow Up

After the discussion, summarize the key points and any agreements reached in writing. This ensures clarity and provides a reference for future conversations. If a decision is deferred, request a timeline for when it will be revisited.

7. Maintain Professionalism

Regardless of the outcome, maintain professionalism and gratitude. Salary discussions can be challenging, but handling them with respect and understanding strengthens your relationship with the board and reinforces your commitment to the church’s mission.

Conclusion

Discussing salary with a church board requires preparation, clear communication, and empathy. By presenting a well-reasoned case, choosing the right time, and engaging in constructive dialogue, pastors can navigate these discussions effectively. The goal is to reach a mutually agreeable solution that supports both the pastor’s needs and the church’s well-being, fostering a positive and productive working relationship.

If I can be of service to you and/or your board, please feel free to connect at Ted.miller at guardianwm.com, or (214) 501-1400 (Office).

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