I have heard from countless pastors who opted out of Social Security in their youth only to regret it 30 years later. By that time, the idea of retirement has become more of a reality and they realize that they have done nothing to prepare. Apparently, California Congressman Kevin McCarthy has heard the same. In February, McCarthy introduced a bill that would allow pastors who had opted out to opt back in. The bill, H.R. 5904, is also called the Clergy Act of 2020.  What Does The Clergy Act Of 2020 Say? The bill, which you can read here, is short and simple. It’s stated goal is, “To allow a period in which members of the clergy may revoke their exemption from Social Security coverage, and for other purposes.” It has been 20 years since the last time Congress allowed pastors to opt back into Social Security. H.R. 5904 creates a 2-year window ...

Today we are going to talk about insurance, which is a favorite topic of conversation for almost no one. In fact, on a recent road trip, my mom wanted to take a quick nap so I listened to a podcast about insurance to help put her to sleep. I’m sure many of you can relate. Even though insurance isn’t a very exciting topic, it’s an important one. Especially disability insurance, which is what we are talking about today. If you own your home, you likely have homeowners insurance because your mortgage provider requires it and it’s just smart. If you have a car, you surely have it insured, because state law requires it. You’re probably on top of health insurance, even if you are using a medical sharing ministry. Disability insurance, however, is easy to overlook. It isn’t required by law and the people around you aren’t using it on a ...

Last month, we talked about the different kinds of fees that you may pay to own shares in a mutual fund. This month, we are going to go into a little more depth on loads, or sales charges. While they are listed plainly as percentages, calculating them is not nearly as easy as you would think. How Are Mutual Funds Valued? First, we need to review a few of the facts about mutual funds. I say review, but this is probably all new for most people. I’ll try to make it as clear as possible. Mutual funds are actually investment companies. They are companies that buy investments to create a portfolio of stocks and bonds and things like that. Then they sell shares of that portfolio to people like you and me.  The shares of mutual funds are not traded on secondary markets like stocks and bonds. Rather, you purchase shares directly from the ...

As of 2018, there were about 352,000 personal financial advisors in the US. “Financial Advisor” is not a regulated term, so it covers a broad range of services and business models. This article will look at the different ways that financial advisors get paid and answer the burning question, Are they actually worth it? Commissions Many financial advisors are salesmen who earn their keep through commissions on the products that they sell. Some will tout their services as “free” because you do not have to pay them anything directly. However, theirs is a business and not a ministry, so it is not free. You are paying them for their services, the money just goes to the financial product company first.  The problem with this model is that it creates a lot of conflicts of interest. You want the financial product that is best for you and the advisor wants to earn money to ...

Tax Deductible Expenses Q: Are my vestments tax deductible?  A: Since the passage of the 2017 Tax Cuts & Jobs Act, unreimbursed business expenses are no longer tax-deductible. That would include your vestments. The only way to avoid paying taxes on those expenses would be for your church to set up an accountable reimbursement plan according to IRS rules. Correcting Tax Errors Q: I have been a pastor since 2010. I use TaxAct to file my taxes and only became aware this year that I am supposed to be paying self-employment tax. For the first time this year, TaxAct asked if I was clergy (I don't think we'd been asked that in the past) and then asked if I had ever filed Form 4361. For my pastoral role, I don't believe I've ever paid self-employment tax though I have never filled out form 4361. Am I in error? Do you know what steps I ...

When the Federal Reserve slashed interest rates to near zero in response to the coronavirus crisis, everyone decided that it was a perfect time to refinance their mortgage. There were so many refinance requests that lenders had to artificially raise rates in order to lessen demand and give them a chance to keep up. Rates bounced around quite a bit but have spent the rest of the year near historic lows. Because of this, a lot of people have refinanced their mortgages this year. If this is news to you, you should really look into refinancing because with a lower interest rate you could save thousands of dollars over the life of your loan.  What Is A Cash-Out Mortgage Refinance? A choice you have to make when refinancing is how much you want your new mortgage to be for. One option is to borrow the same amount as you currently owe and just ...

Are you invested in mutual funds? If so, you’re in good company. Over 46% of American households own mutual funds. But do you know how much your mutual fund costs? That’s a much harder question. I’m sure 46% of Americans don’t know that one! One of the key components of good stewardship is knowing where your money is going. That’s why having a budget is so important. Most things we spend our money on have a price tag, but mutual funds are a little bit more complex. Here is a breakdown of mutual fund fees, so that you have a better idea of what you’re spending on your investments and why. Loads Front-end loads are commissions or sales charges that you pay when you purchase shares of the mutual fund. If you buy an “A Share” mutual fund, that means you will be paying a commission, or front-end load.  A “B Share” mutual fund has ...

While pastors have the unique opportunity to opt out of the Social Security system, that doesn’t mean that they cannot participate at all. If your spouse has earned enough Social Security credits to be eligible for benefits, then you are eligible for some benefits as well. These are the spousal benefits that you can receive: Medicare Benefits Many people wrongly believe that opting out of Social Security means that you can no longer participate in Medicare. Everyone age 65 or older who is a US citizen or permanent resident and has lived in the US for at least 5 years is eligible for Medicare (and some other people, too). The difference that opting out makes is whether or not you have to pay for Part A, which is hospital insurance. If you opt out with Form 4361, then you have to pay premiums for Part A while everyone else gets it for free. ...

If you’ve been paying any attention to the news (and I don’t blame you if you haven’t), you’re probably aware that the stock market has been very active lately. Active like a volcano. You see headlines like “Stocks Lose 34% in One Month” and “Stocks Jump 2%.” What does it all mean, though? Do you really understand what they’re talking about? What Do We Mean By The Stock Market? First of all, what is the stock market? Stocks are portions of ownership in publicly traded companies. They can be bought and sold on exchanges, or markets. When people talk about the stock market, they are usually referring to the valuation of stocks. When they talk about the market going up or down, they mean that overall stock prices are going up and down.  If that’s as clear as mud, read my more in-depth explanation of the stock market here. For the sake of ...

Q: I'm having an accountant do my taxes who I believe hasn't done taxes for pastors before. This is my first year in full-time ministry. My accountant is under the impression from Form 4361 that I have to be in ministry for 2 years before I can file for tax exemption. My understanding is that I just need to file this form within 2 years of claiming exemption. Can you help clarify? A: You are correct. You can file Form 4361 the day you become a licensed minister if you want to. After 2 years, you have missed your opportunity and will be a part of the Social Security system permanently. Until you have an approved Form 4361 from the IRS you will have to pay Social Security taxes, but they can be refunded once you have an approved exemption. Q: My husband is on staff at a local church as a ...