Top Three Reasons for Church Ministers to Save With a 403(b) Retirement Plan

Top Three Reasons for Church Ministers to Save With a 403(b) Retirement Plan

Reason 1: Income Tax Deduction

Contributions to your 403(b) account are tax deductible for federal income and social security taxes. Putting money into the 403(b) reduces your taxable income for that year. For example, if you put $5,000 into your 403(b) account and your federal income tax rate was 10%, by deferring that income you just saved $500 in federal taxes. Plus, $765.00 is exempt from social security tax.

Reason 2: Deferred Income Tax

You won’t have to pay income tax on you pretax contributions to your 403(b) until after you start taking distributions from your retirement account. This is great for income taxes because you will likely be in a lower tax bracket when you retire, and taxed at a lower rate.

Reason 3: Elective Contributions Avoid Self-Employment Taxes

Churches can make elective contributions to your 403(b) account on top of what you contribute. Many Ministers do not realize that these elective contributions avoid Social Security and Medicare taxes. This is a huge benefit unique to 403(b) retirement plans.

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