Understanding Social Security


Remember that ministers have a unique relationship with Social Security.

Ministers have a dual tax status.

  1. Ministers are considered regular W-2 employees for federal income tax purposes — just the same as non-ministerial employees.
  2. However, ministers are considered self-employed for Social Security purposes.

All employees are required to pay taxes for Medicare and Social Security in some way; the difference is how they pay these taxes.

  • The Medicare and Social Security tax for non-ministerial employees is called FICA (Federal Insurance Contributions Act). The employer withholds this tax on the non-ministerial employee’s behalf.
  • The Medicare and Social Security tax for ministerial employees is called SECA (Self-Employment Contributions Act). The employer does not withhold this tax on the ministerial employee’s behalf, but rather ministers are subject to and responsible for paying the full 15.3% self-employment (SECA) tax through an estimated tax procedure, completing Schedule SE with their Form 1040.

To learn more about how Social Security rules and taxes apply to ministers during working years, read Ministerial Tax Issues and access our free, annual Ministers’ Tax Guide for our participants.

Understand how Social Security will work for you from a long-term perspective.

  • If you’re a young pastor, you may take Social Security as a given or you may have had seasoned pastors encourage you to opt out. Opting out is not a decision you should take lightly, which is why we want to provide you the detailed and accurate information you need to make a well-informed choice about Social Security.
  • If you’re a pastor who already opted out of Social Security, we’d like to recommend some action steps to help bridge the financial gap you may experience.
  • If you’re an older pastor or a non-ministerial individual simply thinking of drawing Social Security soon, keep reading!

Drawing Social Security is a matter of time — literally.

As you enter your 60s, you are likely beginning to think about drawing Social Security. After all, you’ve paid into the program for years and are finally eligible at age 62. So why not begin receiving your payment immediately?

Although you can start drawing Social Security at age 62, that doesn’t mean you should. And while many need to withdraw as soon as they are eligible due to financial or health reasons, doing so results in a 25% or more reduction in the benefit amount compared to waiting until Full Retirement Age (FRA), which varies depending on your year of birth.

In fact, for each year you wait to begin receiving Social Security between your FRA and age 70, the benefit percentage increases by 8% — which may be a better decision in the long run. It all depends on your unique circumstances.

Let’s say your monthly benefit from Social Security shook out to be $1,500 a month at the full retirement age of 66. If you take it at age 62, you are giving up 25% of payments that are rightfully yours. If you wait until age 70, you gain an extra 32% of income. Again, if you can wait, you should.

Keep in mind that Social Security is only one piece of the larger retirement puzzle.

Unfortunately, many Americans look to Social Security as the main key to their future income when it should be just part of a larger equation.

Although Social Security is a significant benefit, it is wise to view it as a supplement to a well-prepared retirement plan — not as a complete retirement plan itself — especially since the full funding status of Social Security is a topic that our elected officials must address in the future.

So what does this all mean for you as you near retirement?

For most retirees with adequate savings, the best strategy is to wait to collect Social Security benefits until either FRA or age 70.

But if you need to start withdrawing earlier, make sure you have a monthly budget based on all your retirement income and stick to it!

Get a pulse on your Social Security estimates so you can begin planning your retirement income strategy.

If you’re unsure where your Social Security benefit amount stands, the Social Security Administration (SSA) encourages individuals to create a secure online account through a my Social Security account to access their information and Social Security statements at any time.

Reviewing these statements may be helpful in estimating a potential income gap in the future. Once you know this information, this input will be vital as you map out a retirement income strategy. GuideStone® offers different retirement income resources and tools for you to use within your MyGuideStone® account.

Quick Recap:

  • Ministers for Tax Purposes handle Social Security differently than other taxpayers.
  • If you’re eligible to receive Social Security benefits immediately, it does not mean you should, as the needs and financial situation of different retirees are unique.
  • Understanding your Social Security projections will help you make informed decisions as you map out a retirement income strategy.

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If you have further questions, contact a customer solutions specialist at 1-888-98-GUIDE (1-888-984-8433) Monday through Friday between 7 a.m. and 6 p.m. CT.