Recently there has been a lot of press on Pastors' salaries. I think much of the interest can be attributed to both the growth and popularity of the mega churches and their pastors. Some of the interest however, is just plain "nosiness". Pastors’ salaries have traditionally been kept relatively confidential and for the vast majority of the Pastors of our local churches, their salaries are also relatively modest.Here are a few things that Pastors should think about at least annually as well as when they take a new assignment or accept a new pastorate.
1) Make yourself accountable: While some churches are small and some are large and every church has its own particular practices, every pastor can insist that they are at least held to the same standard as everyone else. Don’t get into the habit of turning in expenses or the church credit card without receipts; don’t write checks to yourself or handle the church’s cash. Keeping yourself somewhat separate from the business and finances of the church is healthy and Biblical. Find someone with the gift of administration to handle these things for you.
2) Review your life, medical and other insurance needs: most churches are small and studies have shown that “solo” pastors are less likely to have church paid insurance plans than senior and staff pastors. Pastors that don’t have insurance provided by their church should evaluate some very attractive self employed health insurance plans. “Catastrophic Loss” or “Major Medical” plans are widely available and with this type of health insurance you typically pay out-of-pocket for doctor's visits and prescription drugs, but major hospital and medical expenses above a certain deductible are covered. Most catastrophic health insurance plans cover necessary hospital stays, non-elective surgery, intensive care, diagnostic, X-ray and lab tests.
3) Remember that you are “minister for tax purposes” that requires specific W2 filing requirements and tax considerations. Make sure that your church accountant understands the issues. Dan Busby’s Minister’s Tax & Financial Guide is a “must-have” for every Pastor and is updated annually. Ministers have “dual tax status" and hopefully they have not opted OUT of social security. In the majority of cases, this election is done without full consideration of the consequences and without proper consideration to the legal basis of being “conscientiously opposed to the acceptance of any public insurance.”
4) Take full advantage of the minister’s housing allowance: Notice I didn’t say “abuse” the minister’s housing allowance. It is the responsibility of the church to determine if an individual qualifies as a minister in the eyes of the IRS but the responsibility of the minister to estimate how much should be designated to cover the full costs of housing up to the fair rental value of his/her residence. While the church is still ultimately responsible to “designate” the amount and exclude it from the minister's federal income tax, all too often churches assign arbitrary and inadequate amounts to junior employees (i.e. Associate Pastors get $8,000 housing allowances and Youth Pastors get $4,000).
Finally, while you may consider that your retirement benefits are “heavenly” and that you’ve stored up all your treasure in heaven, careful retirement planning is still advisable. Contributing to a 403(b), IRA or Rabbi Trust is a great way to save in a tax-efficient manner. Again, hopefully you haven’t opted out of Social Security but you’ll still need to find other ways to supplement your income during retirement.
