A new crop of future pastors and church leaders have just graduated from seminary and are now entering full-time vocational ministry. Many likely have debt as they enter a field with limited compensation. Dave Anderegg, CFP®, a Financial Planning Advisor for PCA Retirement & Benefits (RBI), shares his financial advice for new seminary graduates.
Understand Your Call Package
About 90% of new graduates do not completely understand their call package. Many new church ministers and pastors will be offered an all-in-one “lump-sum” pay package. This means the church will provide you with only a set amount of money and you are allowed to spend it however you like. It is easy to look at, for example, a $70,000 call package and see that as a $70,000 salary. But, once you take healthcare, long-term disability insurance, life insurance, retirement plan contributions, and a social security allowance into account, that $70,000 package starts to look more like a $45,000 salary plus benefits. There is no way of knowing the amount of your ‘bottom-line’ salary, in comparison to a job outside the church, unless you take the cost of these benefits into account.
Look for Call Package Provisions
If you are a graduating seminary student in your late 20s or early 30s, you have a greater need for life insurance, long-term disability coverage, and retirement savings than at any other time in your life. Unfortunately, many churches and new seminary graduates alike fail to see the importance of providing these coverages and savings early. Before accepting a call package, make sure it contains each of the 4 following provisions: healthcare, retirement contributions, life insurance, and long-term disability. If it’s a lump sum package, subtract these costs to determine your net salary.
Don’t opt out of Social Security
Though it’s not supposed to be an economic decision at all, opting out of social security is financially tempting. Just by filling out a form, you can avoid a 15% self-employment tax for the rest of your life. Why not opt out? While there may be people in your life advising you to take this course of action, opting out of social security as a pastor is generally one of the worst financial decisions you can make. It might seem like a great decision now, but you’ll rarely find a pastor over 50 who would recommend it!
The short term savings of opting out is not worth the long-term costs to you and your wife. 80% of wives outlive their husbands by an average of 5-6 years, so pastors need to ensure that they have enough saved up to support their wives after they are gone. While you may not be alive to experience the downside of your decision, your wife most likely will be. She’s probably the one who will become impoverished later in life. And I haven’t even mentioned the cost and loss of Medicare and disability coverage! Don’t opt out.
Evaluate your Cost of Living
Evaluate your budget. What do you need to live on? How much will your family spend a week? If you do not sit down and do the hard work to determine how much your family needs to live on, you may end up taking a call that you cannot afford. The best way to avoid this is to create a budget before accepting a call to ensure that the church is offering enough for your family to live on. And, if they are not offering enough, tactfully make them aware of this issue, and don’t be afraid to wisely advocate for the needs of your family.
Be Disciplined with your Finances
As a minister, you have 2 calls on your life: a call to ministry, and a call to provide for your family. Being faithful financially is like being faithful spiritually – it requires focus, discipline and commitment. It takes work to pay off debt and soundly structure your family’s finances. Remember, statistically, your wife will probably be the one who bears the brunt of poor financial decisions. It is part of your calling to ensure that you and your family adequately cover your risks now and sufficiently save to be able to pay the bills once the paychecks stop later in life.
Understanding finances, retirement plans, social security, benefits, and call packages can be complicated, so do not be afraid to ask us for help! It’s what we’re here for. If you are serving a PCA church or ministry, please contact us. We’d love to help you.
Geneva Benefits Group serves those who serve others, providing practical support for the financial, physical, and mental wellbeing of people who work in full-time ministry.