Why Aren't Preachers Financially Prepared For Retirement?

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A July 2015 survey of 4,249 senior pastors from 19 denominations revealed some sobering statistics regarding pastoral preparedness for retirement. The study, which was paid for by the National Association of Evangelicals, found that the median pastor surveyed was 54 years old with a seminary degree, and his church was in a rural area in the Midwest. To make it easier for you to understand his unique situation, I will refer to this "median pastor" as Pastor Paul. My goal is to provide a bit of insight into why he, like may pastors, may not be financially prepared for retirement.

According to the study, Pastor Paul has been the pastor of his current church of 84 people for 7 years. 82% of the church members feel that they have a positive relationship with him. The church's annual budget is $125,000 and the majority of it is given by a minority of the congregation. Pastor Paul's combined annual salary and housing allowance equals $49,500.  

Pastor Paul does have a retirement savings fund; however at age 54, its balance is a mere $30,000. (One out of five pastors surveyed had zero saved for retirement.) Why is this? Let me share three reasons why he has only minimal retirement savings, especially considering that he is only about 15 years away from retirement. 

First, Pastor Paul is considered self-employed for Social Security purposes. This means that 15.3% of his salary is set aside for his Social Security payments, unlike most employees who have half of theirs paid by their employer. Preacher Paul could have avoided paying the 15.3% if he took the opt-out-of Social Security option available to preachers. (This option must be executed at the beginning of entering the ministry and the preacher must be conscientiously opposed to having the government provide financially for him during retirement.) This results in pastors in retirement receiving neither monthly Social Security checks nor being able to access Medicare. What is the big deal with Pastor Paul paying the full Social security amount since every self-employed person must do this? One important difference between the two is that those who own their own business are building equity through the physical property, buildings, and the business itself. There is no "financial equity" in a pastoral career for Pastor Paul to accumulate. The other main difference is that he does not have the opportunity to increase his personal salary like a business owner is able to do as his business prospers.

Another financial challenge for Pastor Paul is the cost of his ministry education. The ministry is considered a professional career and requires a bachelor's degree and usually graduate-level seminary training as well. When he entered the ministry as a young man with no ministry experience, Pastor Paul earned entry-level ministry wages. In addition to regular monthly living expenses, Pastor Paul also had a sizeable student loan payment. The 2015 survey revealed that the younger pastors had a median school debt of $25,374. In addition to getting married, having children, starting a career, etc., their priority will be to pay this debt, and thus they will have less money to invest for retirement.

The third area which may greatly affect Pastor Paul's retirement preparedness is his housing situation. Let's assume that he, like 38% of the pastors surveyed, lives in a parsonage, which is a home owned by the church. This may sound like it would be very helpful to him and he may even welcome this provision, since it eliminates having to pay monthly rent or a mortgage payment. However, in reality, it adds to Pastor Paul’s financial challenges long-term. When he resigns from this ministry to follow God's leading to a new church ministry, he has no home equity built up and leaves with nothing to put down for his next home. One of Pastor Paul’s greatest asset-building opportunities, home ownership, is not available to him while he lives in a parsonage. When he retires, if he has lived in a parsonage his whole ministry career, he must either pay monthly rent or borrow money for a home at this late stage in life.  

Pastor Paul is like so many pastors I know. His congregation either never gives his retirement preparation a thought, or they incorrectly assume that someone is overseeing this financial need and making sure funds are being set aside. One of Pastor Paul's biggest stressors is financial problems. In fact, according to the survey, 64% of pastors identified the lack of retirement savings as their greatest cause of financial stress, worry, and/or concern. 

Although it is certainly not the full solution to this complicated situation, what a privilege we have to share how affordable it can be to retire at Baptist Mid-Mission’s Missionary Acres in Silva, Missouri to each Baptist Pastor Paul that we meet! God continues to use Missionary Acres as an independent living retirement community for many, like our Pastor Paul, who have spent their lives ministering and preaching the Gospel of Christ; and by doing so, may have given up the opportunity to prepare adequately for their own retirement income.