Pastors and Retirement
by John C. LaRue, Jr.
Pastors must plan for retirement just like other American workers. But besides social security, what types of retirement plans are pastors actually contributing to? And at what age do most pastors think they'll have enough money saved to retire? Research conducted for Your Church reveals the following information about pastors and retirement.
Social Security: No Longer a Given
According to our research, the typical pastor is 47 years old and about 19 years away from collecting full social security. That benefit may be in jeopardy, however, due to life expectancy increases and a huge group of baby boomers who will start collecting social security in 2012. If the fund comes up short, future benefits may be reduced, the retirement age may go higher, and social security taxes may be raised.
Unlike the average American worker, pastors can opt out of social security. Though our study did not measure how many pastors have chosen this option, we do know that 39 percent of pastors' churches pay the employer part of social security self-employment tax, averaging $3,198 for senior pastors, and $2,109 for solo pastors.
How Much to Save
Social security isn't enough for most pastors to retire on. They should also contribute to a retirement plan. Financial planners recommend saving four to eight times the household's peak annual earnings in order to retire at the same standard of living. Pastors should save the following money for retirement (for planning purposes, these figures should be adjusted for inflation):
Annual Salary Amount to Save
Married, with non-working spouse
$39,180 $155,000 - 310,000
Married, spouse works part-time
$46,320 $185,000 - 370,000
Married, spouse works full-time
$61,690 $250,000 - 500,000
Pensions, IRAs, and Other Plans
About 89 percent of the pastors surveyed are involved with a retirement program. Churches help 7 of 10 (71%) pastors with this by contributing to a pastors' pension plan. Typically, senior pastors receive $4,286 a year, and solo pastors get $3,486 a year.
Sixty-one percent of pastors have a denominational pension. The median value of such programs is $30,000. Graph 3 shows how the value of denominational pensions varies by the base salary and age of pastors.
Such figures show that pastors must rely on more than a denominational pension to maintain their standard of living during retirement. Our survey shows that 59 percent of pastors are contributing to a retirement plan other than a denominational pension. Twenty-one percent contribute to an IRA, 21 percent to a 403(b) plan, and 18 percent to other retirement plans.
In addition, 34 percent of pastors' spouses have a retirement plan.
When to Retire
When asked when they believed they would be financially ready to retire, 46 percent of the pastors who responded said at age 65. About 18 percent thought they'd be able to retire before age 65. About 36 percent said they didn't think they'd be able to retire until after age 65. Seven percent thought they'd have to wait until after age 70.
In 1996, Your Church mailed 1,200 surveys and 594 were returned, for a response rate of 52 percent. With those samples, results are considered accurate to within plus or minus 4 percent.
John C. LaRue, Jr., is vice president of research and development for Christianity Today International, in Carol Stream, Illinois. He may be reached by e-mail email@example.com. Past Special Reports can be found on the Web at:http://www.ChristianityToday.com/cbg/features/report.html.html.
Copyright © 1998 by the author or Christianity Today International/Your Church magazine. For reprint information call 630-260-6200 or e-mail firstname.lastname@example.org.
Mar/Apr 1998, Vol.44, No. 2, Page 80