Tag Archives IRA

Should You Invest in a 403(b) with High Fees to Have a Housing Allowance in Retirement?

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Pastors who save into their church’s retirement plan are eligible to withdraw some of that money as a tax-free housing allowance in retirement. It’s a great benefit to have. Unfortunately, a lot of church retirement plans have investments with higher fees than are available in IRAs. Because of this, I have been asked multiple times if it is worth it. Does the ability to claim a housing allowance outweigh the cost of the higher fees?

As with everything in financial planning, the answer is that it depends. It depends on a lot of things, the primary one being your tax situation. Since the question involves calculations and doesn’t have an easy answer, I asked one of my amazing colleagues, Cal Treichler, to help me out. In addition to being a Certified Financial Planner, Certified Student Loan Planner, and PK, he’s also a spreadsheet whiz. In his free time, he created this spreadsheet that allows you to compare the housing allowance benefit with the benefit of lower investment fees:



Housing Allowance vs. Investment Fees Comparison

Let me show you how it works. Let’s say you have $500,000 in your 403(b) and you’re trying to decide if you should keep it where it is in a target date retirement fund with 0.8% fees or roll it into an IRA and invest in a Vanguard target date retirement fund with 0.08% fees. Your combined federal and state income tax rate is 22% and you have $20,000 of eligible annual housing expenses. This is what it looks like:



As you can see, between the fees and the housing allowance tax benefit, with the 403(b) you end up with a $400 net benefit while with the IRA you end up with a $400 net cost. The green box is the better deal for you. Isn’t that cool how he even color-coded the results? 

Now let’s look at how things change if your 403(b) investment fee is 1%. 


Here, even with the benefit of the housing allowance, you’ll still end up $200 ahead by having your money in the IRA with the lower fees. Go ahead and download the spreadsheet and play with the numbers. The higher your housing allowance and tax rate, the more advantageous the 403(b) while the higher the 403(b) fees, the more advantageous the IRA. 

The Effects of Social Security Taxes

A client recently asked me that same question about 403(b) vs. IRA. However, he wasn’t referring to money he had already built up in his 403(b) but new retirement contributions. In his case, there is another factor to consider. This pastor did not opt out of Social Security, so he pays about 15% of his income in self-employment taxes

Self-employment taxes is just another name for Social Security and Medicare taxes. Everyone has to pay them except for pastors who have opted out. In most cases, any money that you save for retirement has already had Social Security and Medicare taxes taken out. That is true for anything you put into IRAs and also most employer-sponsored retirement plans, even pre-tax accounts. 

The one exception is pastors. Because of the way pastors pay Social Security and Medicare taxes as if they are self-employed, contributions to employer-sponsored plans happen before those taxes are calculated. This is unique to pastors and the only way they can avoid paying those taxes without opting out

So, for a pastor who is participating in Social Security, putting $1,000 into an IRA and $1,000 into a church 403(b) is not a fair comparison. While you can put $1,000 into your 403(b), after paying the 15% taxes you only have $850 left to put into the IRA. How does that affect the decision?

Here is a chart that compares your options. The initial investment is $1,000 less any taxes that you have to pay before the money can go into the account. SECA taxes are 15% and for income taxes, I’m assuming 12% federal and 6% state. For 403(b) investment fees, I chose 0.8%, which is the fee for the PCA’s target date retirement fund since I’ve had a couple of clients invested in that recently. The IRA fees are Vanguard’s fee for their version of the same target date retirement fund.

AccountInitial InvestmentCalculationInvestment FeeBalance After 20 Years with 7% GrowthTaxation of Withdrawals
Church 403(b)$1,000No taxes paid0.80%$3,455Tax-free for housing allowance, otherwise subject to income tax
Traditional IRA$85015% SECA taxes paid0.08%$3,393Subject to income tax
Roth IRA$67015% SECA + 12% Federal + 6% State income taxes 0.08%$2,675Tax-free


As you can see, in this particular situation it is still more advantageous to invest in the 403(b) even though the investment fees are 10 times higher. That won’t be the case every time, so you’ll have to calculate it with your own unique numbers to get your own answer.  

I hope this spreadsheet is helpful for you and also the tip about avoiding SECA taxes!

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Should I Invest My 403(b) (Or IRA) In A Target Date Fund?

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This post mentions some specific investments. They are only examples and not an endorsement of those investments.

Perhaps the most difficult, or at least most intimidating, thing about saving for retirement isn’t finding money to set aside, but rather choosing how to invest that money. After all, 1 in 5 Americans who aren’t invested in the stock market says it’s because they “don’t know enough.”

What Is A Target Date Fund?

Because of this, in 1994, a new kind of mutual fund was created: the target date fund (TDF). It is a kind of investment designed so that you can just put your money in and forget about it until it’s time to take your money out. You will recognize them because they have a future date in their name, like LifePath Index 2040 Fund or T Rowe Price Retirement 2040 Fund.

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How The SECURE Act Affects Pastors

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Back in 2017, the president timed things just right so that I spent the first day of my family’s Christmas vacation researching the tax reform bill and how it affects pastors. Now, almost two years to the day, he signed into law another sweeping financial reform just in time for me to fly down to visit my family for Christmas. Thanks, Congress, I really appreciate your timing.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019, as part of a year-end appropriations bill to keep the government running. It makes significant changes to retirement plan rules that affect most Americans. Also included in the 1,770-page bill was the Taxpayer Certainty and Disaster Relief Act of 2019, which could affect how you file your tax return in the coming months. While there are no changes to the laws as they relate to pastors specifically, there are a number of other changes that might affect you.

Changes That Affect Your 2019 Taxes

Tuition And Fees Deduction

The above-the-line deduction for tuition and fees that had expired has been reinstated for 2019 and 2020. Up to $4,000 of qualified tuition and fees can be deducted. For 2019, you will need to choose between taking the deduction and the American Opportunity Credit or Lifetime Learning Credit. 

Mortgage Insurance Premium Deduction

Mortgage insurance premiums may once again be included as an itemized deduction for 2019 and 2020. If your mortgage bank requires insurance on your loan and the loan qualifies, you can include it on Schedule A.

Medical Expense Deduction Threshold

The percentage of your income that medical expenses have to exceed to be deductible was supposed to increase to 10%, but that has changed. The threshold will remain at 7.5% for 2019 and 2020. Any expenses above 7.5% of adjusted gross income can be deducted.

Mortgage Forgiveness

Usually, when a debt is forgiven, the amount forgiven is counted as income and you have to pay taxes on it. The new law makes it so that qualified primary residence indebtedness that is forgiven can be excluded from income so that no taxes will be due on it.

Federally Declared Disaster Areas

Taxpayers living in federally declared disaster areas have been allowed to take penalty-free money out of their retirement accounts for 2018 and 2019. In addition, the new law gives taxpayers living in those areas an automatic 60-day filing extension. This applies to all current and future disaster areas.

Changes That Affect Retirement Accounts

Traditional IRA Contribution Age Limit

Starting in the 2020 tax year, there is no longer an age limit for traditional IRA contributions. Previously, you had to stop making contributions at age 70 ½. Now, you can continue making contributions as long as you have earned income, regardless of your age. You still cannot make contributions for 2019 if you are over 70 ½. 

Graduate & Post-Doctoral Student IRA Contributions

Previously, graduate and post-doctoral students could receive taxable stipends and non-tuition fellowships that were included in gross income but didn’t count to allow them to contribute to an IRA. (You or your spouse must have income to be able to contribute to an IRA.) Thanks to the SECURE Act, that taxable income now makes them eligible to contribute to an IRA.

Required Minimum Distributions

Up until December 31, 2019, once a person turned 70 ½ they were required to start taking withdrawals from their retirement accounts (except for Roth IRAs). These are called required minimum distributions (RMDs) and a 50% penalty is imposed on any amounts not withdrawn in time. 

The new law changes the age at which RMDs must be taken to 72. It only applies to those turning 70 ½ after December 31, 2019, though. If you turned 70 ½ before then, you must start taking withdrawals already.

Birth And Adoption Withdrawals

You can now take up to $5,000 out of your IRA to cover qualified birth and adoption expenses penalty-free. The distribution must be made after the actual birth of the child or the adoption is finalized. However, you can use it to pay yourself back for your initial adoption expenses or money you spent preparing for your new child. 

The $5,000 is a per-person, per-child limit. That means that both parents are eligible to take $5,000 withdrawals and they can take them for each of their children. There is also a provision in the law where you can repay your retirement account the amount that you removed in relation to a birth or adoption, but regulations have not yet been issued to clarify how or when that must be done.

Inherited Retirement Account Distributions

Previously, when someone inherited an IRA or another retirement account, they were required to start taking distributions calculated so that they would last over the heir’s lifetime. Many people with money to spare would leave their retirement accounts to grandchildren because of this so that the money could continue to grow over the 60-80 year life of the youth. 

Under the new law, those inherited retirement accounts must be emptied within 10 years (though there is no requirement for how much must be taken each year). The only exceptions are spouses, disabled individuals, and individuals not more than 10 years younger than the account owner, who can still stretch out the distributions for their lifetime. Minor children of the original account owner have a special exception, but only until they reach the age of majority, at which point they have to empty the account within 10 years.

Changes That Affect Educational Savings

529 Plan Usage

The new law allows up to $10,000 from a 529 plan to be used to pay down student debt without taxes or penalties. This is a per-person limit and in addition to the 529 plan beneficiary, the siblings (of any age) of the beneficiary are also eligible for up to $10,000 to pay down their loans. Also, apprenticeship programs have been added to the list of institutions where 529 plan funds can be used, as long as they are registered with the Department of Labor. This part of the law is effective January 1, 2019, so you can use it retroactively for expenses incurred last year.

In earlier versions of the SECURE Act, there was a provision to allow 529 plan funds to pay for homeschooling expenses. However, that did not make it into the final version of the bill which has become law. 

There are a number of other provisions in this law that became effective January 1, 2020, but most of them do not relate to you as an individual. The above changes are the most important parts of the law as they affect individual taxpayers. 

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What Missionaries Can Do Today To Save On Taxes In Retirement

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It was 25 degrees Fahrenheit when I took my kids to the bus stop this morning. That’s freezing! Even though there were kids there in shorts and without jackets, for someone from Southern California like me, that’s a bit too much for my body to handle. My nose has already started running from subjecting myself to such unbearable temperatures. 

Runny noses are one of those annoying yet inevitable parts of life. Kind of like taxes. One of those things you know you’ll never be truly free of, yet you do everything in your power to limit. Because I believe in staying within my area of expertise, today we are going to talk about limiting taxes, though, not limiting runny noses. 

Today’s tip is for missionaries, or pretty much any American living abroad. This is it: utilize the foreign earned income exclusion to do tax-free Roth conversions in order to limit your tax liability in retirement. If none of that made sense to you but you live abroad and like the idea of saving on taxes, keep reading.

What Is The Foreign Earned Income Exclusion?

The United States of America is one of the only countries in the world that taxes its citizens no matter where in the globe they are located. The only other one is Eritrea. Most other countries tax people based on residency, not citizenship. 

What that means, though, is that if you’re an American living in Spain, you will be taxed by the Spanish government because you live there and the American government because of your citizenship. That doesn’t seem quite right, does it?

In order to help alleviate this unfair double taxation, the IRS has given us the Foreign Earned Income Exclusion (FEIE). The FEIE allows qualifying Americans to exclude some of their foreign earned income from US taxation. The limit adjusts every year for inflation and is $105,900 for 2019. To claim this exclusion you have to file Form 2555 and you can learn more about it here.

What Is A Roth Conversion?

The other key component of today’s tax-saving equation is a Roth conversion. Before explaining what that is, we need to do a quick review of retirement accounts.

The two types of retirement accounts available to Americans that aren’t employer-dependent are traditional IRAs and Roth IRAs. The difference between the two is taxation. With a traditional account, you put money in before paying taxes. Then you pay taxes on it when you take it out. With a Roth, you put money in after paying taxes and don’t owe anything when you take it out.

If you have money in a traditional IRA, you are allowed to move it to a Roth. This is called a Roth conversion. Because traditional IRA funds haven’t been taxed yet, when you move them to a Roth IRA they are included in your income so that you can pay income taxes on them. Once you’ve paid the taxes to get the money into a Roth account, everything you withdraw in retirement will be tax-free.

How Does It Work Together To Save Missionaries On Taxes?

So, how can you combine the Foreign Earned Income Exclusion and a Roth conversion to save money on taxes?

Let’s say you’re that missionary in Spain and you have $40,000 in a traditional IRA. For 2019, you will have $55,000 of earned income. Your income is well below the allowed FEIE of $105,900, so it will all be excluded from taxation.

Now, you’ve erased your tax bill but you still have the standard deduction available to you. In 2019, it is $12,200 for a single filer and $24,400 for a married couple. You can maximize the standard deduction available to you by converting that amount from your traditional IRA to a Roth tax-free.  

So, our Spanish missionary has their entire earned income excluded with the FEIE. Then, they list $24,400 as income from the Roth conversion and the standard deduction cancels it out for a total tax bill of $0. It would only take our Spanish missionary about 2 years to convert all of his retirement funds from taxable to tax-free. 

If our Spanish missionary is in a 12% federal income tax bracket when he retires, he will have saved $4,800 in tax dollars by taking advantage of the Foreign Earned Income Exclusion and standard deduction while living overseas. Pretty cool trick, huh?

Here are the steps again:

  1. Live overseas.
  2. Earn less than the Foreign Earned Income Exclusion limit.
  3. Convert your standard deduction amount of traditional IRA funds to a Roth account.
  4. Repeat each year until all of your IRA money is in a Roth instead of a traditional account.
  5. Enjoy tax-free withdrawals in retirement.
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Retirement Savings Options For Ministers

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Whether or not you ever want to stop working, it is important to plan and prepare for retirement just in case your health or your wife force you to slow down at some point. A lot of people say that their retirement plan is to simply not retire, but real life has shown us that that isn’t always an option.

Knowing that, it is irresponsible not to plan for being unable to work someday. The biggest part of a retirement plan is saving money now, while you are still working, so you will have something to live off of when you stop working. Just creating margin in your budget to be able to save for the future is the biggest battle. If you can start to actually save, then it’s all fairly easy after that.

While stock-piling cash in a can under your bed is better than what a lot of Americans are doing (which is nothing), there are smarter ways to save for retirement. There are ways that will allow your money to grow and earn interest and ways that your money can legally avoid taxation. Here are the top four ways for ministers and pastors to save for retirement.

Church-Sponsored 403(b) Or 401(k)

Most denominations and some independent churches sponsor their own retirement plans. Most of these are 403(b) plans, though some are now starting to use 401(k)s. (You can read about the difference here.) Both kinds of plans are tax-advantaged, which is a big help when saving for retirement.

These plans are great because they allow you to set aside up to $19,000 (more if you’re over 50) before paying taxes on it. That means you have more money to invest and start earning compound interest. Some even offer Roth options, where you invest after paying taxes but don’t have to pay taxes on the gains.

One of the best things about saving for retirement in your church’s 403(b) is that it qualifies for the housing allowance in retirement. That means withdrawals from your 403(b) can be tax-free in retirement if you use them for qualified housing expenses. You can read all about that here.

Traditional Or Roth IRA

If you don’t have access to a 403(b) or 401(k), your best option is to save in an IRA. Like with the church-sponsored plans, there are tax advantages to utilizing one. Traditional IRAs allow you to invest your money before paying taxes on it, which leaves you with more to invest. Roth IRAs allow you to pay taxes first and avoid paying taxes on any of the money that your account earns. You can learn more about the differences here.

You can’t put quite as much into an IRA, only $6,000 for 2019 (or $7,000 if you’re over age 50). However, they do hold some advantages over the workplace retirement plans. They offer more flexibility in investment options and you have more control over the account. Because of this, it might be a good idea to split your retirement savings between an IRA and a workplace retirement plan if you have access to one. That way you can take advantage of the benefits of each.

Taxable Brokerage Account

If you don’t have access to a workplace retirement plan, saving $6,000 a year into an IRA may not be enough to prepare you for retirement. Once you’ve maxed out your IRA, you may need to start saving into a taxable brokerage account. 

As the name implies, you receive no tax benefits for saving in a taxable brokerage account. You have to pay taxes on your money before you put it in and you have to pay taxes on all of the gains that your account generates.

Even without tax advantages, a brokerage account is likely better than just saving in a traditional savings account. Savings accounts barely pay any interest, usually not even enough to keep up with inflation. Brokerage accounts allow you to invest your money in the stock market, which means your money has a chance to grow and multiply. If you don’t have a lot of money to save for retirement, then having your accounts grow in this way is key to your ability to retire one day.

Health Savings Account

A health savings account (HSA) has the best tax advantages out of all of your options covered in this article. However, I listed it last because it is probably available to the least of my readers. You see, you have to have a qualifying high-deductible health insurance plan in order to be eligible to open an HSA. Check with your insurance provider, though, because if you are eligible, it’s more than worth it to open one.

An HSA is a savings account that is used for health care expenses. Why is it listed as a way to save for retirement? Because just about everyone has health care expenses in retirement, usually more than at any other time in their life. If you pay for your current health care needs out of your cash flow, an HSA can be an incredibly powerful retirement savings vehicle.

What makes an HSA so special is that it has double tax benefits. Like a traditional retirement account, you get to put your money into it before paying any taxes, so you have more to put in. Then it also has the benefits of a Roth account, where you get to take all of the money out tax-free. You don’t pay taxes when you put the money in or when you take it out. That’s why an HSA provides more tax savings than any other retirement account out there. And, you can invest it in the stock market just like any other retirement account. 

While you may not want to retire, it’s important to prepare just in case you are forced to. What I have listed here are not the only ways that you can save, you could invest in real estate or save cash in a can under your bed, but they are the easiest and most beneficial ways to save. 

Saving for retirement is always a good idea. Even if you don’t end up using all of your savings, you can always use it to bless your kids, your church, or your favorite missionary. And who wouldn’t want to do that?

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How Do I Report IRA Contributions To The IRS?

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Today’s post was inspired by one of my loyal readers who had a very frustrating time trying to figure out the answer to that simple question. Unfortunately, I’m too late to come to his rescue, but my hope is that others of you may find this useful.

It Doesn’t Work Like The Housing Allowance

I think this subject may actually be harder for pastors than for others. Why? Because of the clergy housing allowance. The housing allowance is exempt from taxation. IRA contributions are tax-deferred, which is basically exempt from taxation at the present time. So shouldn’t they work the same way?

Hardly. Which can throw pastors for a loop. 

With the housing allowance, it’s never even included in your income. It never shows up on your W-2. The only way the IRS even knows you got the money is when you pay your self-employment taxes, if you didn’t opt out. If you did opt out, the money never appears anywhere except your bank account.

It’s not nearly that simple with IRAs.

How IRA Contributions Appear On Your Pay Stub

You can make IRA contributions through direct payroll deductions or on your own after you get paid. If you have it come straight out of your paycheck, it will be very different than the housing allowance. It will appear at the bottom where medical insurance premiums and the like are deducted, Adjustments to Net Pay. 

The top line that shows your salary or earnings will include the total amount. Your tax withholdings will be calculated on that total amount. Then, at the bottom, the IRA contribution will be deducted.

You may be wondering, how are traditional IRA contributions pre-tax if my withholdings are calculated before they are deducted? Good question. They are exempted from taxes, or made pre-tax, on your tax return. 

How To Report IRA Contributions On The New Form 1040

On the old Form 1040, there was a line called IRA Deduction (line 32). That line was subtracted from taxable income to arrive at Adjusted Gross Income. Simple.

Not so simple with the new, “simplified” Form 1040. They basically took half of the information from the old form and divided it into a handful of new schedules. Line 32’s new home is on Schedule 1, Additional Income and Adjustments to Income (see below). At least they were nice enough to keep the same line numbers!

Thus, to get a tax benefit from making an IRA contribution, you have to first enter that contribution on Schedule 1, line 32. That will then become a part of the total on line 36 of the same form. The number from Schedule 1 line 36 is then transferred back over to Form 1040 and included on line 7. 

Don’t just write the same number on line 7, though. Line 7 is your total income from the previous line less the number from Schedule 1. Aren’t you glad Congress simplified our taxes? 😉



So, whether your IRA contributions are deducted directly from your paycheck or you make them on your own after getting paid, you need to fill out Schedule 1 when you file your taxes in order to defer income taxes on the contributions. I hope this article has made the process a little bit less confusing and good job on saving for your future!

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11 Reasons Your Kids Should Practice Entrepreneurship This Summer

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Here in the Pacific Northwest, it is strawberry season. For most of us, that means we get to chow down on juicy berries that make us avoid the bland store-bought strawberries for several months afterward. For my daughter, it means business. Literally, business.

The minute the signs go up for the U-pick strawberry field near our house she starts asking when she can sell strawberries. You see, rather than just eating them, she likes to pick them and then set up her own stand by the side of the road to resell them. Yes, that’s her in the picture above.

It’s funny because at 5 she doesn’t seem to really care about money. Until strawberry season. Then, it’s all about earning money.

I think it’s a good thing. There are a lot of important life skills and lessons she’s learning as she sits in that field selling her wares. I think every kid should experiment with entrepreneurship, whether it’s babysitting, selling berries, pressure washing sidewalks, or something else. Here are some of the benefits of childhood entrepreneurship that my daughter and I came up with:

Practice Math Skills

When customers see how old my daughter is, they always want to test her math skills. If it costs $4 and I give you $5, what’s the difference?

I can’t blame them, though, because I do the same thing. It’s a great chance for her to practice that math that she’s been learning all year in kindergarten. Kids of all ages get a chance to put their math into practice when working with money. It’s good for them to see that there’s more to math than just endless worksheets.

Learn To Count Money

Working with money also gives them a chance to practice counting it. This is especially good for younger children who still see no more value in a $20 bill than a $1 bill. If you throw some coins in there, then the lesson gets really good. My daughter said that it’s important to learn to count money because “when you’re older you need to know how much you have.” She’s got a point.

Develop People Skills

One of the things that even trips up adults is that in order to make money, you need to interact with people. Entrepreneurship is good for your people skills no matter what age you are. Several years ago a neighborhood boy came to my door soliciting pressure washing and I was so impressed with how professionally he spoke to me and explained his services that I hired him on the spot.

If your kids have the opportunity to learn to talk to adults and explain their goods or services, it will only benefit them in the years to come. My daughter is young, so she is just learning to not be shy and look at people when she speaks to them. Older kids will have to rise to a different level of communication and sophistication of people skills, which is good for them.

Face & Overcome Fears

This one is closely tied with the last one because a lot of kids (and adults) are afraid of talking to people. But, like I said, in order to earn money you have to face your fears and interact with people. My daughter was a great example of this last year.

All spring she was scared to death of bees and wouldn’t look at or talk to anyone, even our next door neighbor whom she loves. However, when strawberry season came around, she spent hours sitting in a field full of bees and talking to strangers. I was so impressed with how she rose to the challenge and overcame her fears. Sometimes I wish I could be more like her.

Experience The Relationship Between Money & Work

Second Thessalonians 3:10 says that if you don’t work, you don’t eat. The concept that nothing is free and you have to expend effort in order to get a reward is being lost in our current culture. To me, the most appalling part of the Green New Deal that is being floated around is that they demand a living wage for anyone who is unable or unwilling to work. Yes, you should receive a living wage for doing nothing even if you’re perfectly able to work. Wouldn’t that be wonderful?

Unfortunately for some, the real world doesn’t work that way. If you want something, you have to work for it. There is a relationship between work and money and the sooner our kids can learn that the better our entire society will be.

Learn How Business Works

I studied business in school, so I’m a little biased, but I think everyone should learn about business. If you have a young adult going off to college that doesn’t know what he or she wants to study, have them study business. It is applicable to anything you do in life.

Going to work in a bank? You need to understand business. Going to be a professional artist? You’ll really need to understand business. Going to be a pastor? A lot of business principles still apply in the church (accounting, anyone?) even if some of your motivations differ.

Setting up their own little business will give kids hands-on experience with how business works. My daughter has learned that in order to make money, you need to have something (a good or service) that people want enough to pay money for it. To get that good or service you will need to either work hard for it or buy it. And then to make a profit, you need to charge more for it than it cost you.

This knowledge will help her later in life when she starts getting credit card offers in the mail. No, being pre-approved is not a special privilege because you are spectacular and unique. They are trying to sell you their product, a credit card, because statistics show that they will probably make money off of you. Lots of money.

Understand Economic Systems

As I mentioned above, you can’t sell a good or service if no one wants it. There has to be a demand for your product. And you can’t just charge anything you want. My daughter would have loved to have charged $50 a pint for her strawberries, but then no one would have bought any. She’s not that cute.

Supply and demand are basic economic principles that can sometimes be hard for kids to wrap their minds around until they live them out. Starting a business is an excellent way for kids to learn about economic systems by living them.

Learn To Tithe

My daughter can be incredibly generous most of the time, but not always. Every once in a while it’s like running into a brick wall and there’s no way around it, she simply won’t let go. When I brought up tithing in that field as we waited for customers I ran into the brick wall.

I had to use my entire Bible college education to try to persuade her that it’s worthwhile to give God 10%. It’s incredibly painful for her to think of parting with $3 of her hard-earned money but it will only get harder as she gets older and earns more and more. I think it’s very important to teach children generosity and tithing at a young age and the best way to do that is for them to start earning their own money.

Improve Prayer Life

When we were near the end of our berries and there were no customers coming, my daughter resorted to prayer. It was adorable to see her praying to God and asking him to send us customers. I think she was also trying to make a deal where her tithe was contingent on him sending customers, but hey, at least she’s starting on the right foot.

It may sound silly, but having their own business can be really good for your kids’ prayer life. Just try it and see.

Earn Money

Here’s the most obvious benefit: your kids can earn money if they start a business. Money to pay for Pokemon cards, ice cream cones, trips to the water park, and summer camp. The more money they earn, the less money will be coming out of your pocket. It’s a win-win for everyone.

When I asked my daughter why it’s good for kids to earn money, her response was, “To buy your own toys or when you’re older a phone so someone doesn’t have to give it to you for your birthday.” Kids’ activities and desires can be expensive and it’s good for them to learn to work for what they want.

Start A Roth IRA

Finally, if your kids earn their own money then you can open Roth IRAs for them. Anyone with earned income, regardless of age, can open a Roth IRA and contribute the lesser of their earned income or $6,000 in 2019. My daughter earned $33 selling berries last week so I’m going to put $33 of my own money into a Roth IRA for her.

Why would I do that? First of all, the sooner she starts investing, the longer her money has to grow. If all she ever invests is that $33, by the time she is 67 it will have grown to almost $7,000 if she can earn 9% returns (which is likely with her time horizon). I really don’t think she’ll use it for retirement, though. More likely she’ll use it to pay for college or buy her first house.

Contributions can be withdrawn from a Roth IRA at any time tax-and penalty-free. Also, once a Roth IRA has been open for 5 years, you can withdraw up to $10,000 of earnings to purchase your first home or take out money for qualified higher education expenses tax- and penalty-free. I think having her own investment account will also be a great teaching tool for her as she gets older, even if she doesn’t have much in it.



As you can see, there are a lot of benefits, both tangible and intangible, to your kids practicing entrepreneurship this summer. Perhaps more valuable to you than any of the above, it will also combat boredom. A kid who is out earning money is not moping around the house saying they are bored and annoying their siblings.

So, what are we waiting for? Let’s get these kids to work!

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How To Take A Pastor Housing Allowance In Retirement

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If you’re a pastor, you know that your ministerial housing allowance is perhaps the biggest financial benefit of being in the ministry. It allows you to avoid paying taxes on all of your housing expenses, including things like cable television and landscaping.

Because of this, one of the most common questions pastors ask is if they can keep taking a housing allowance in retirement. The answer? It depends on where your money is coming from. Unfortunately, one of the most common pieces of advice that professional financial advisors give could actually disqualify you from taking a housing allowance in retirement.

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