What To Do If Your Church Doesn’t Offer A 401(k)

Before I joined Vanderbloemen, I wrote for a trade publication covering the 401(k) industry. During my time there, one phrase was brought up a lot – “retirement saving crisis.” Many people don’t like to think about growing old and retiring. As a result, they don’t save for retirement. In fact, a 2015 survey of more than 4,000 pastors found 33 percent had less than $10,000 saved for retirement and 92 percent listed insufficient retirement savings as one of their main financial concerns.

While this issue is something that applies across the board, there are some aspects that make this challenge especially difficult for pastors. For example, many lead pastors are typically their own employer. This means that unless they have gone through the process of designing a retirement plan for their church, they likely don’t have access to an employer-sponsored retirement savings vehicle.

Also, according to research released earlier this year by the Barna Group, the median age of pastors is on the rise. The research firm’s president, David Kinnaman, put it this way, “...there are now more full-time senior pastors who are over the age 65 than under the age of 40.” In other words, there are many full-time pastors in or nearing the retirement age. That said, just like succession planning, it’s never too early to start thinking about saving up for retirement. Many financial professionals advise saving for retirement as early as possible and contributing around 15% of your income. If you don’t currently have access to a retirement plan at your church, here are some alternative options you can consider to start saving for retirement now.  

1. Open an IRA.

One of the most straightforward ways to save for retirement on your own is to open an individual retirement account (IRA). Much like a savings account, you can deposit funds into an IRA and save up for retirement. Unlike savings accounts, IRAs can be tax-deferred. When you open an IRA, you can choose between a traditional IRA or a Roth IRA. In a traditional IRA, the money you deposit can be tax-deferred and the money you invest grows in the account without being considered taxable income. A Roth IRA is the exact opposite. You pay taxes on the income you put into the account, but you get to withdraw the money in retirement tax-free.

Currently, you can only contribute up to $5,500 annually into IRAs. However, the cap is raised to $6,500 a year for those 50 years of age or older.

2. Look into what your denomination offers.

Even if your church doesn’t currently offer a retirement savings plan, some denominations offer retirement plans for their members to participate in. If you’re certified or affiliated with a certain denomination or religious organization, you may want to check if there are any retirement savings plan options available.

For example, The Foursquare Church offers a Foursquare Retirement Plan for eligible members. The United Methodist Church has similar options for clergy and employees of UMC organizations who serve as sponsors of the plan. Group retirement savings vehicles like these may be offered as more of a supplemental way to save for retirement, but if you haven’t started building your “retirement nest egg,” it could be a good place to start or at least explore your options.

[READ: 6 Mistakes Churches Make When PAying Pastors]

3. Seek help from a financial advisor.

Even after writing about 401(k)s for almost a year, the financial jargon and investment lingo still intimidate me. If you’re like me, a financial advisor would be a good investment. There are many statistics and “financial crises” out there to make anyone panic, but that information alone is not going to help. You can be a mindful steward of your finances and resources without being perpetually worried about whether you have enough money to retire. A financial advisor can take that panic and help convert it to a practical plan for your future.

What are some ways you find helpful to prepare for retirement as a pastor?