When an individual becomes a minister, one of the important decisions is whether to opt out of Social Security.
Remember, as a minister, you have a dual tax status. You are an employee for federal income taxes and self-employed for Social Security tax purposes.
The decision to opt out must be made within the first two years of ministry when you have ministerial earnings of $400/year.
But there’s more to the decision story.
Remember that opting out of Social Security is NOT a financial decision. It is a religious or theological objection. As outlined on IRS Form 4361 you are certifying under penalty of perjury that because of your religious beliefs, you’re opposed to the acceptance of public insurance that makes payments on your behalf.
“I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister…) of any public insurance that makes payments in the event of death, disability, old age or retirement; or that makes payments toward the cost of, or provides services for, medical care. Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.”
So, what are you giving up if you opt out of Social Security?
So, what’s the bottom line regarding Social Security – Don’t Opt Out!
Social Security is the bedrock and foundation of a solid financial plan for your retirement. Without this extremely important benefit, you are going to need to contribute more to your retirement plan and purchase adequate levels of disability and life insurance to provide for benefits you and your family will forfeit. And remember, ultimately, it’s a religious decision, not a financial one.
Contact us if you would like to discuss your retirement plan and how social security factors into it.
If you’ve already opted out, we can help you understand what it means and how to save appropriately based on your decision.
Navigating ministerial financial planning can be complicated, but as part of GuideStone’s mission to enhance the financial security and resilience for those who serve the Lord, we have developed resources to make it easier for you. For more information about common financial and tax-related questions and considerations for ministers, please visit GuideStone.org/MinisterialResources or call us Monday through Friday, from 7 a.m. to 6 p.m. CT.
We look forward to serving you as you serve the Lord.