Faith

Should Ministers Opt-Out of Social Security?

I have been asked many times from pastors, missionaries, and those in ministry about whether they should opt-out of social security. As a follower of Christ and financial planner, I have spent a lot of time researching, pondering, and praying over this question.

I will go through the problem, two points of view, some projections, and my perspective.

The Problem

Social Security and Medicare provide eligible participants with the following:

  1. Retirement benefits

  2. Disability benefits (if you become disabled before age 65)

  3. A death benefit to your survivors

  4. Medical care (Medicare)

Within the first two years of ministry, pastors can opt-out of paying the 15.3% self-employment tax. This is composed of a 12.4% Social Security tax and 2.9% Medicare tax. Employers typically pay half of these taxes (7.65%), but ministers and self-employed individuals must pay both halves.

The decision can be overwhelming. In the first two years of ministry, you may withdraw from the program. After that, you’re stuck with your choice for life, at least for all your ministry income.

However, this is not just a financial decision, it’s a moral one as well. Here is the language from IRS Form 4361, which is what you submit to opt-out:

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance 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.

The government made this provision exclusively for those who choose to withdraw on moral grounds, not financial ones. The language is the same as the conscientious objector provision in the military.

The Points of View

The decision is even more difficult when we get conflicting counsel. Well-respected Christian thought leaders differ in their opinions on what to do.

Dave Ramsey: Team Opt Out

Dave Ramsey has helped many people get out of debt and transform their household finances. Naturally, many people have sought his counsel on the matter. Here are a couple quotes from Dave’s site:

If I were in your shoes and still serving as a church pastor, I’d opt out in a nanosecond. That’s because sending money to the Social Security office is a bad way to manage your money for God.” (Here’s the link to the post)

There are certainly people within Christianity who think it's your moral obligation to give money to the government. I'm not one of them. (Link)

Dave recommends contributing your tax savings to a combination of retirement, life insurance, and long-term disability insurance. This is to make up for what Social Security would have provided.

Russell Moore: Team Stay In

Russell Moore, president of the Ethics and Religious Liberties Commission of the Southern Baptist Convention, provides an argument for remaining in Social Security. Many have sought his counsel on this subject as well. He wrote an article in 2010 expressing his views in depth. Here’s a quote from Moore:

Our Lord Jesus refuses to call his followers to withhold taxes from Caesar. “Render unto Caesar that which is Caesar’s,” Jesus announces (Matt. 22:21). This isn’t because Caesar is so monumentally important but because money is not. It isn’t worth subverting one’s witness or one’s God-ordained deference to authority.

The Projections

Although the decision to opt-out is supposed to be a moral one, it has huge financial implications as well. Let’s look at an example calculation for an individual making this decision.

For these calculations, we’ll use the following assumptions:

  • John, born in 1957

  • Works for 35 years (1989 – 2024)

  • Retires at 66 ½, his Social Security Full Retirement Age (FRA)

  • Average pay during working career = $50,000

Situation 1: Stay in Social Security

The projected Social Security benefit at age 66 ½ for John would be $2,311 per month. If you’re wondering how I calculated this, you can view the calculation process here. John’s spouse can also claim half of his Social Security benefit, or her own benefit, whichever is higher. So, if John had a non-working spouse, their total Social Security income would be $3,467 per month.

Situation 2: Opt Out of Social Security

What if John opts out of Social Security and invests the money he saves in taxes in a retirement account? I assumed that he made monthly investments into a retirement account with a 7% average annual return. The three scenarios below are if he invests all his tax savings (15.3%), most of his savings (10%), and some of his savings (7%). Keep in mind, you would not be able to invest all your tax savings since you would need to use some to pay for disability and life insurance to compensate for those lost Social Security benefits.

*The monthly income is based upon the principles of the  4% Safe Withdrawal Rule .

*The monthly income is based upon the principles of the 4% Safe Withdrawal Rule.

Comparison

Let’s compare the various retirement incomes for the different strategies:

NOTE: These calculations are estimates and actual Social Security and investment values will vary.

Based upon the comparison, it’s clear that in some situations, you can financially benefit by opting out.

My Perspective

Despite the projections above, I recommend remaining in Social Security. Here are 4 reasons why:

1.) Theologically and Ethically

I wholeheartedly agree with Russell Moore in his article. I love Dave Ramsey and the impact he’s had on so many people, but I think he’s wrong on this.

Ramsey’s argument is based on the accumulation and preservation of personal wealth. God wants us to steward his resources well, but his primary purpose is not our wealth, but his glory. Ramsey did not use a single scripture in either of his resources on the subject on his site. His statement that Christians do not have a moral obligation to pay taxes is directly contradicted in scripture.

It’s clear Jesus commanded his followers to pay taxes (Romans 13:7, Matthew 17:24-27, Matthew 22:17-21). We are supposed to pay even if the government is corrupt. Russell Moore noted that the Roman government was composed of polytheist dictator-worshipers. The taxes would have been used for many things contrary to Christian belief. Roman taxes would have been used to support a ruler who claimed to be a deity, as well as for crucifixion stakes. Jesus commanded his followers to pay taxes nonetheless. Jesus called for the payment of taxes, not because the government is so good or important, but because our money is not. The day that Christians are known for non-payment of taxes rather than the Gospel of Jesus will be a sad day indeed.

If you think paying taxes is so wrong, would you be willing to preach that in your congregation? Would you be willing to go to jail for it if it were not given as a choice? Are the members of your congregation sinning by paying into Social Security while you are not? If the answer to these questions is no, then you are not a “conscientious objector,” as the IRS exclusion states, and filling out that form would be a lie.

We can debate whether Social Security will be around when we retire all day. Even if you think it will not be, you should still contribute. Jesus knew the Temple wouldn’t be around for long, and he still paid the temple tax (Luke 21:15). Heck, the U.S. government may not even be around when we retire, but that doesn’t mean we shouldn’t pay any taxes. Fear of the future does not excuse us from the obligations of the present.

2.) Lack of Discipline

Although the decision to opt-out is supposed to be a moral one, it has huge financial implications as well. Based upon math alone, you should opt-out, right? Not so fast.

The projections assume that nearly all your tax savings get invested for retirement. You may think you are disciplined, dedicated, and committed for the long-haul. The truth is, you're probably not.

William Thornton, a retired Southern Baptist pastor, wrote an article exploring this topic. In it, he provides a quote from a member of the Mission: Dignity program, which helps retired ministers and spouses (emphasis mine):

In 20 years of assisting retired ministers on low incomes, I have met quite a few who opted out of Social Security at a young age. In spite of good intentions, savings were never set aside and these ministers reached retirement without sufficient resources. Not one of our Mission: Dignity recipients has ever told me, in retrospect, that opting out of Social Security was a good idea.

Put yourself in my shoes (those of a financial planner). Could you recommend that someone leave Social Security behind?

Imagine that you are a rock-climbing instructor. You are teaching students how to climb a 100-foot rock face. A student comes up to you and asks if he can climb without any safety ropes. The student insists that they can scale the wall faster without the hindrance of ropes. You know the skill of the student, but also the difficulty and duration of the climb. Would you permit the student his request? Of course not!

What if they get half-way up the wall and realize that they needed the ropes after all? What if they fall? What if the student isn’t as skilled as you thought?

In the same way, I can't bring myself to recommend opting-out of Social Security.  

3.) Risk

With investing comes risk. When you opt-out of Social Security, you exchange a fixed benefit for a variable one. Taking on investment risk for 35-years is not for the faint of heart. There are several factors that could reduce your retirement benefit if you choose to opt-out:

  • Being too conservatively invested – In the words of Young Jeezy, “Scared money don’t make no money.” An overly conservative portfolio can be a detriment to your long-term return potential. I’ve met too many people with retirement portfolios in cash or money market accounts to trust the average investor.

  • Making poor investment decisions – Although the market has averaged about 10% over the long-term, the average investor comes in at around 5%. Why? Because people make dumb decisions. They sell in fear at market lows and buy in overconfidence at market highs. Most of my job is keeping people from making dumb decisions.

  • Not investing enough – 74% of retirement success is based upon one thing: your savings rate. 1 in 3 Americans has less than $5,000 saved for retirement. Everyone loves to talk about investment risk, but the biggest risk is not saving enough.

  • Not investing soon enough – Compounded interest is no joke. Someone who starts saving at a younger age will have a much easier time saving for retirement than someone who delays. Too many people do not take retirement saving seriously until it’s too late.

In short, when you opt out of Social Security you give up one risk, government instability, for many more.

4.) Potentially Marginal Benefit

In the example above, John and his spouse would have a $3,467 monthly benefit together. Compare this with the $3,827 per month they would generate if they had invested all their tax savings instead. Is it worth the $360 extra income per month for 35 years of added risk and discipline?

Conclusion

In summary, I do not think ministers of the Gospel should opt out of Social Security. The theological and moral arguments against it are sound, the risks are many, and the financial impact can be marginal.



Resources

IRS Form 4361 (The Opt-Out Form)

Russel Moore’s Advice

Dave Ramsey’s Advice

Publication 517 (Detailed Info From IRS)

How Medicare Works for Pastors Who Have Opted-Out of Social Security



The Radical Budget of John Wesley

John Wesley was an Anglican pastor in the 1700's. He is credited with starting and initially leading the Methodist movement.

First off, this post is not to give a biography of the life and teachings of John Wesley. Nor is it to weigh the theological teachings of Wesley and the Methodist movement compared to those of others (particularly Calvinism). This post is merely to highlight an exceptional aspect of the life of an extraordinary man.

What can an Anglican pastor from the 18th century teach us about personal finance?

First, A Little Background on John Wesley

As a young child, Wesley was no stranger to poverty. His father, Samuel Wesley, was a priest. His mother, Susanna, taught their children at home. Samuel and Susanna had a total of 19 children together, 9 of which tragically died during childbirth (John Telford, The Life of John Wesley, Ch 2.). Between Samuel's meager earnings and the burden of raising 10 children, the Wesleys were in a constant state of financial turmoil. Their finances were so poor that Samuel was twice placed in prison for his large debts.

John Wesley was determined not to be of the same poor financial stature as his parents. He later went on to teach at Oxford University and later be elected as a fellow of Lincoln College. Initially, John seemed to splurge his newfound wealth, spending his money on card games, tobacco, and brandy.

One day at Oxford, an event happened that changed his perspective on money. Charles Edward White describes it this way:

[Wesley] had just finished paying for some pictures for his room when one of the chambermaids came to his door. It was a cold winter day, and he noticed that she had nothing to protect her except a thin linen gown. He reached into his pocket to give her some money to buy a coat but found he had too little left. Immediately the thought struck him that the Lord was not pleased with the way he had spent his money. He asked himself, Will thy Master say, "Well done, good and faithful steward"? Thou hast adorned thy walls with the money which might have screened this poor creature from the cold! O justice! O mercy! Are not these pictures the blood of this poor maid? - White, "What Wesley Practiced and Preached About Money"

What Wesley Did Next

Soon after this incident, whether solely caused by it or not, John Wesley's views on budgeting and spending changed for the remainder of his life. He began to reduce his expenses so that he would have more money to give away. His first year at Oxford, his income was 30 pounds a year (enough for a comfortable living for a single individual). Through budgeting, he found that he could live on 28, and gave away 2. In his second year, his income doubled to 60 pounds, but he kept his expenses the same, and thus gave away 32 pounds (more than he kept for himself). This process continued, even as his income vastly grew. Below is a table of what the generosity of John Wesley looked like as he progressed in life:

 Year Income Living Expenses To the Poor
First Year: 30 pounds 28 pounds (93%) 2 pounds (7%)
Second Year: 60 pounds 28 pounds (47%) 32 pounds (53%)
Third Year: 90 pounds 28 pounds (31%) 62 pounds (69%)
Fourth Year: 120 pounds 28 pounds (23%) 92 pounds (77%)
Eventually: over 1,400 pounds 30 pounds (2%) over 1,400 pounds (98%)

Source: The Accountability Connection by Matt Friedman, Victor Books,  1992, p. 12.

When I first read this story and looked at the numbers above, I had several different reactions.

I felt ashamed. I was extremely humbled to discover a man that lived so radically in generosity with his finances. I was able to see that greed is more than the mere desire for more wealth, but that it also lies in the fear of loss -  The debilitating fear of poverty that precludes us from parting with our precious pennies. Generosity in Christianity today seems to be all about "How much do I have to give to be 'good' with God?"  The conversation about charity and tithing is too often about math and percentages than it is about the heart.

I felt inspired. I used to think my childhood dog was big until I learned about cows; I used to think cows were big until I learned about elephants. I used to think my giving was sufficient until I learned about truly generous people. Not rich people, but regular, ordinary, often poor, people. Wealth is never a prerequisite for generosity.

I felt excited. Our storybooks are filled with themes of someone small accomplishing something big. It's amazing how much my meager generosity can accomplish as soon as it leaves my clenched fist.

The Takeaway

Now, I admit that I am far from being Wesley-esque in my giving. I am not saying that you should feel bad if you don't give away over 98% of your income. I hope that you are encouraged and inspired by the story of John Wesley, and not discouraged and ashamed, as I was at first. Our giving should not be a mere mathematical formula that we filter our income through like we do when we fill out our taxes. Our generosity should be fueled by faith, obedience, and surrender to God. A person's money is intimately intertwined with their heart. Your money will follow your heart, and with enough time, your heart will ultimately follow your money.

Not Normal

Keep in mind that radical giving is completely contrary to the motives of the world around us. It always has been and always will be. Even in John Wesley's time, the English Tax Commissioners were so flummoxed with Wesley's generosity that they investigated him in 1776, insisting that for a man of his income he must have "silver dishes" that he was not paying tax on. He wrote them saying, "I have two silver spoons at London and two at Bristol. This is all the plate I have at present, and I shall not buy any more while so many round me want bread" (Toward the Tithe and Beyond, John Piper).

Now this I say, he who sows sparingly shall also reap sparingly; and he who sows bountifully shall also reap bountifully. Let each one do just as he has purposed in his heart; not grudgingly or under compulsion; for God loves a cheerful giver. And God is able to make all grace abound to you, that always having all sufficiency in everything, you may have an abundance for every good deed. - 2 Corinthians 9:6-8

 

 

Resources:

John Wesley, Methodical pietist

An Account of the Life of John Wesley

What Wesley Practiced and Preached About Money

Toward the Tithe and Beyond

Ten Rules on How to Get Along with People

Ten Rules on How to Get Along with People

In April of 1965, Allan M. Trout, columnist for the Courier Journal, published a list that he mysteriously found in his middle drawer while cleaning out his desk. The list was titled "Ten Rules on How to Get Along with People," and to this day does not have an author associated with it. My father later passed this same list on to me when I was in high school. The list had a profound impact on me, and I still reference it today.

The Truth About the 10% Tithe

There are a lot of questions around the subject of giving to the church:

  • What percent of my income do I give?
  • Do I use my gross income or my net income to calculate what I should give?
  • Does giving to other ministries count towards my tithe?
  • Is 10% really mandated by the Bible?

There are many really wonderful articles and sermons about this topic, and I will link some of which at the bottom of this post. What I hope to offer is a concise Biblical basis for approaching and refuting some of these questions.

Where Do We Get 10% From and Where is it in the Bible?

A lot of people don’t know that the word for “tithe” in Hebrew and Greek both simply mean “a tenth.”

We see mentions of this concept of tithing scattered all throughout the Old Testament in Leviticus 27:30Numbers 18:26Deuteronomy 14:242 Chronicles 31:5Nehemiah 10:35-39Malachi 3:8-10, etc. Tithes in the Old Testament were often the first portions of a harvest or even livestock.

The New Testament only directly references tithing in three or four instances. Its first reference is that of the Pharisees and their self-righteous adherence to the law, including the tithe (Matthew 23:23). Jesus had a harsh rebuke for these Pharisees that prided themselves in their obedience to the law, but were blind to justice, mercy, and faithfulness. Jesus even goes as far to compare these Pharisees to “white-washed tombs which outwardly appear beautiful, but within are full of dead people’s bones and all uncleanness” (v. 27). However, Jesus does not speak against the tithe, in fact, he upholds it by saying, “but these are the things you should have done without neglecting the others” ( v.23). 

The next New Testament instance we see that mentions the tithe is in a parable about a Pharisee (yes, another Pharisee), and a tax collector (Luke 18:9-14). The illustration is prefaced with, “to some who were confident of their own righteousness and looked down on everyone else, Jesus told this parable.” The story is a simple comparison of two men: a Pharisee who is prideful that he is ‘better’ than other men because of his good deeds, including his tithe (v. 12), and a tax collector who knew that no matter what he did, he would always be a sinful man. The Pharisee was prideful in his works, and I imagine that he felt that God was lucky to have him, while the tax collector was humbled at the feet of a mighty God and knew that he could accomplish nothing apart from God’s mercy.

Freedom From the Law

The New Testament provides the introduction and fulfillment of what is called the New Covenant and ushers in a freedom from the law for those who have faith in Christ (for those who want more information on the difference between the Old and New Covenants, here is a great place to start).

So what does this mean for the tithe?

We are no longer constrained to a specific percentage or number that the Bible sets forth as the requirement for what a Christian must give, but that doesn’t mean that the Bible is void of guidance as to why and how we should give.

Why We Should Give

Steven Cole, a pastor in Flagstaff, Arizona gave a sermon series on “God, Money, and You” back in 1993, and if you’re looking for a more comprehensive understanding of the tithe and giving, it’s a wonderful resource. In this series, Cole covers the wrong and the right motivations for giving.

Wrong Motives for Giving: Pride (Matthew 6:1-4), GuiltGreedPressure (2 Corinthians 9:7), GimmicksPower (James 2:1-9Acts 8:18-24).

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.

-2 Corinthians 9:7

So what are the right motives for giving?

Just as we freely love because God so lavishly loves us (1 John 4:19), we generously give because God has given us everything (James 1:17). We are not truly owners of any earthly possession, but rather stewards of God’s resources that he has entrusted us with. Our giving and tithing are not a transfer of ownership, but rather an acknowledgment that it all belongs to God. We also give because it is an act of faith (2 Corinthians 9:8-11), worship (Hebrews 13:16), compassion (1 John 3:17), and support for our local church and pastors (1 Timothy 5:17-18).

“Thus because God has given so abundantly to me, and because I want to please Him, I am motivated to give cheerfully and generously to His work” – Steven Cole.

How We Should Give

  1. We Systematically Give Our Firstfruits– As we see in the Old Testament, the offerings and tithes that they gave to the Lord were the first thing that they did. The first portion of the harvest, livestock, or money was given freely and cheerfully to the Lord. 1 Corinthians 16:2 shows us that a person’s giving should be a regular and systematic act.
  2. In Secret– “Beware of practicing your righteousness before other people in order to be seen by them, for then you will have no reward from your Father who is in heaven. Thus, when you give to the needy, sound no trumpet before you, as the hypocrites do in the synagogues and in the streets, that they may be praised by others. Truly, I say to you, they have received their reward. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. And your Father who sees in secret will reward you.” -Matthew 6:1-4
  3. Sacrificially– At times, we are called to give sacrificially, beyond our regular giving. In 2 Corinthians 8:2-3, Paul speaks of the churches in Macedonia that sacrificially gave in a way that was “according to their means, as I [Paul] can testify, and beyond their means, of their own accord.” This is not the same as our regular, fixed giving, but rather at certain times that God places on our hearts.
  4. Prayerfully– “Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver” -2 Corinthians 9:7. This is where the freedom from the Law comes in. Sometimes, this is the Old Testament principle of the 10%. Sometimes, it means you regularly go above and beyond that. And in some circumstances, it means you do less. If you’re looking for inspiration for your giving, look no further than the life of John Wesley, or the widow’s offering in Mark 12.

Conclusion

We are no longer constrained to the 10% offering mandate of the Old Testament Law. However, how much more reason do we have to give generously in the immeasurable eternal blessings that we possess through Christ Jesus?

As base a thing as money often is, yet it can be transmuted into everlasting treasure. It can be converted into food for the hungry and clothing for the poor. It can keep a missionary actively winning lost men to the light of the gospel and thus transmute itself into heavenly values. Any temporal possession can be turned into everlasting wealth. Whatever is given to Christ is immediately touched with immortality.

-A.W. Tozer

 

 

Great Resources on Tithing:

https://bible.org/seriespage/lesson-5-giving-god-s-way-selected-scriptures

http://www.desiringgod.org/messages/toward-the-tithe-and-beyond

http://www.gotquestions.org/tithing-Christian.html

https://www.thegospelcoalition.org/article/study-christians-who-tithe-have-healthier-finances