Who is affected? Opting out of Social Security is a decision that must be made before filing your tax return for the second year in which you have at least $400 in earnings from the ministry. So, although many veteran preachers don’t seem to make much more, this decision is usually for those just beginning their ministry. If you have waited too long, it is just too bad. The only exception is if one qualifies as a "second faith" minister. For example, a Baptist preacher who became "Charismatic" was eligible; however, an ABA preacher who switched to the BMA was not. Also, the social security exemption is only for income from the ministry, not income from secular employment.

How is it done? Application for exemption is made on Form 4361. You must declare under penalty of perjury that you are opposed for religious reasons to accepting government provided insurance and retirement in regard to your earnings from the ministry. Being opposed to the tax or the manner in which the government uses it is immaterial--it must be based upon your religious convictions.

What Do You Give Up? Social Security provides much more than retirement benefits. It also provides disability benefits for those who are unable to be gainfully employed, as well as for dependent children of such persons. In the event of a premature death, it provides survivors benefits to widows with minor children, and to the children until they grow up. But perhaps most importantly, it provides Medicare benefits for retirees and Medicaid for the disabled. Many are saying that they don’t believe any of these benefits will be there for them, or if so on a vastly reduced scale. Your evaluation of the accuracy of that observation is part of your decision making process.

What is there to gain? The SE tax for a minister amounts to 14.123 of the total of his salary, housing allowance and fair rental value of a church provided parsonage. This tax is paid with after tax dollars. So, if a pastor makes $500 per week, he will pay $3674, in SE tax. Over $4600, of his compensation is consumed paying this tax and the tax on the money used to pay the tax. So, somewhere between $300-$400 per month for stewardship planning can be gained.

Can You beat Social Security? IF the money is really invested, most of the commentators and planners seem to think so.. There is even talk of an alternative to social security, a personal security account, that would allow all Americans to do just that. Ministers already have that option, if elected on a timely basis. When working with a planner just remember to factor in inflation. Also, the amounts accumulated would have to fund the cost of medical insurance unless he planned to secure sufficient calendar quarters of secular employment to vest for Medicare. But look back at the beginning of this paragraph--that’s a mighty big IF.

Or will you rob your family and yourself? If you will not be a good steward of this blessing, you will do just that. If the country ever goes to a national health care system, you may not be able to participate. You cannot just change your mind and opt back in unless the government decides to open a window. So, you are either in, or you are out. The only easy choice is if you are a bi-vocational minister, or already retired from a secular career before entering the ministry. If such case you are already in, because you have (or will be) vested through your secular job, so why not opt out for your ministry wages? You can actually be both in and out.