In my last article, I introduced the new 403(b) matching benefit structure, which becomes effective January 1, 2024. The first step toward eligibility for this match requires local pastors and/or their churches to contribute directly to the pastor’s 403(b) account.
I am not naive. I grew up in a parsonage home, and I’ve served as treasurer of my current congregation. I recognize there are many pastors who believe they have no capacity to add a retirement contribution to either their personal or church budget. I get it, and I know some will look at this as an unrealistic mandate from headquarters, far away from the real world. In fact, we’ve already received our first call suggesting this. Pastors with such concerns are faithful ministers we respect and admire for their call to service on the frontline of ministry, but we have a vision for every pastor to retire well, with sufficient assets to meet their needs and avoid dependency on others.
This new approach has not been implemented without significant analysis and forethought. It is intended to address the elephant in the room, which is that most of our full-time lead pastors are not adequately preparing for retirement—and two-thirds of their churches are not helping them. This is not conjecture. It’s not a guess or someone’s theory. This is fact based on a study of our own Nazarene data by third parties.
Another reality every pastor must face is that any form of retirement benefit offered through Pensions and Benefits USA (P&B), plus Social Security, is not enough for an adequate retirement. These types of plans have always been intended only to supplement, not replace, personal retirement savings.
One pastor has suggested the only way their church will be able to meet this requirement is to reduce their level of giving to the P&B Fund. It may surprise you, but 83% of P&B Fund receipts are used to support current retirement plans. The largest portion of these contributions go to the trust that provides supplemental pension payments to nearly 6,800 eligible participants, most of whom are already retired. These men and women are counting on all of us to continue to support payment of the P&B allocation to honor the denomination’s commitment to them for their years of faithful service.
I recently overheard a financial advisor say, “Corn never has the opportunity to grow until it's first planted.” P&B-provided retirement benefits are a start, but they are not enough. For a married couple, Social Security payments are based on life expectancy, and they will disappear the second you graduate to Heaven. If you, and/or your employer, do not contribute toward your own retirement, there will not be enough “corn” to support your desired lifestyle in retirement, and there will be little to benefit your spouse or others after you’re gone.
If you have no plan in place for retirement savings, please start now and create one. It does not have to be complicated. I encourage you to start by making small payments to your 403(b) account, then make regular (at least annual) incremental increases in the portion you are setting aside. Once you start having retirement contributions automatically deducted from earnings on a regular basis, you will adjust your budget to accommodate them, so they are relatively painless—and your savings will grow over time.
If your base compensation is $50,000 per year, and you file your federal taxes jointly with your spouse, a $1,500 (3%) per year retirement savings rate can both eliminate taxes on your income and increase your net wealth, when combined with our matching contribution. If your local church also matches your contribution, the results will be even better.
The staff of P&B are not financial advisors, but we can point you in the right direction to partners who are licensed professionals. Nazarene 403(b) plan participants may speak (at no cost) with a representative of Fidelity Investments by visiting a local office or by phoning 866-NAZAREN (866-629-2736). For an affordable fee, you may use their advisory services for personal advice in the planning and management of your retirement account. Learn more by logging in to your 403(b) account at fidelity.com/atwork.
I’m looking forward to a better future for Nazarene pastors who can retire when they are ready, rather than having to work additional years due to inadequate savings. P&B will do what we can to help, and we hope our churches will do the same, but please bear in mind, the key to whether you have an adequate retirement at the close of your ministry career largely depends on whether, during active years, you regularly contribute.
Kevin P. Gilmore serves as executive director of Pensions and Benefits USA for the Church of the Nazarene.Note: Investing involves risk, including risk of loss.