The Key To Planning For Pastoral Retirement

Jeff and William Compensation

Many churches and pastors find themselves so focused on their ministry and mission that they do not take the time to properly plan for their pastor’s succession and retirement. While we love to see churches focusing on the current moment and responding to the immediate needs of their community, it’s important that churches are prepared for succession and that pastors are prepared for their retirement. 

In fact, the Bible even talks about the need for Priests to retire after giving so much of themselves to their ministry (Numbers 8:24-26). If you’re a church board member or pastor, there are things you can do now to ensure that your pastor is taken care of in their retirement. I sat down with Jeff Robinson from Guidestone to help explain what you can be doing now to prepare for your pastor’s retirement.

How Should the Church Plan for Their Pastors Retirement?

Succession conversation should start early, just like planning for retirement. Churches want their pastor’s transition to be as seamless as possible, and they want to know that their pastor will be taken care of during their retirement. Here are three things your church should do now, to help prepare your pastor for retirement. 

  1. Make sure your pastor is being compensated well - Far too often, ministers pass up a raise or allow themselves to be under-compensated for the sake of the kingdom. While your church’s missions and ministry are important, it is also important that your pastor is taken care of now and in the future in order to have the resources to continue serving well after their pastoral days are over.

  2. Start planning your pastor’s succession - Whether your pastor’s retirement is 3 years down the road or 30 years, it is never too early to start a succession conversation. Having a smooth transition can be difficult, but planning early can help ensure that your pastor’s succession is seamless. 

  3. Consider where your pastor is currently at with their retirement savings - If you know your pastor has been saving diligently for retirement and is being well-compensated, then consider how you can provide your pastor with a housing allowance or other benefits as they retire. If, on the other hand, you know your pastor has not taken a raise in years and may not have a large retirement fund built up, talk to your pastor about deferred compensation and how the church can help as they prepare for retirement.

Remember, the best thing you can do for your church is to take care of your pastor. Start preparing for your pastor’s retirement now, so you know they will be taken care of when it is time for them to retire.

How Should the Pastor Prepare for Retirement?

There are countless examples of pastors who make good money, but for one reason or another, are not financially prepared for retirement. This causes stress for the pastor, the pastor’s family, and the church. The earlier a pastor begins planning financially for retirement, the better. Here are three important things you, as a pastor, should be doing to help prepare for retirement.

  1. Start saving now! - While your retirement may feel like it is years away, it is important to prepare for retirement as early as possible. The only way you can ensure you will be taken care of during retirement is to start saving now. Put money aside every month for your future retirement and let it build compound interest. Compound interest will help your retirement funds grow quickly and significantly.

  2. Make a plan - Do you know when you want to retire or what you want your retirement to look like? Start planning for retirement early so you can be sure that you are able to retire when and how you want to. Make sure there are things you look forward to about the coming chapter of retirement so you don’t stay in ministry when God is telling you it’s time to move on.

  3. Talk to your church about retirement - Let your church know when you plan to retire and how they can help when that time comes. Your church can help you with your retirement savings through housing allowances, deferred compensation, and other benefits. Help your church help you by talking about retirement early.

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I am a Pastor Retiring in the Next 5-10 Years, is it too Late?

Even if you are approaching your retirement, there are still things you can do now that can help ensure you are taken care of during your retirement. Here are 4 things to start doing today to be retirement ready in the next 5-10 years.

  1. Maximize the amount you are putting in your retirement account - The best way to ensure you are prepared for retirement is simply to save. Start saving now and have your church do the same. With retirement quickly approaching, you are going to want to save as much as you possibly can now to ensure that you have the necessary funds when you do retire in the next 5-10 years. While it may feel like you are already behind, remember compound interest can make a huge difference. 

  2. Talk to your church about delayed compensation - Delayed compensation can be a useful tool for helping to build your retirement funds quickly. Many pastors decide not to take a raise to use the funds for missions and/or many pastors are not paid competitively - deferred compensation can make up for that. Talk to your church about what deferred compensation could look like for you. 

  3. Remember that as a minister, you are able to have a housing allowance even during retirement - Housing allowances are no cost to the church and allow ministers to write off their housing expenses each year when they do their taxes. If you currently do not have a housing allowance, talk to your church board about adding it to your compensation for 2021 and about the steps for including it in your retirement.

  4. Consider working a little bit longer - Depending on your health and other circumstances, you may be able to work past 65 and save some extra money for the next 3-5 years to help prepare you for retirement. Delaying your retirement can also help raise your social security funds. While this may not be a possibility for some, if you are in good health and feel like your circumstances allow you to retire later, use your extra years of work to build a better retirement fund.

It is never too early to start planning for your pastor’s retirement. Regardless of when your pastor is going to retire, Guidestone can help your church and pastor be financially prepared for whatever the future may hold.

If you’re unsure about how your pastor should be compensated now to prepare them for the future, we offer a compensation analysis that can help you determine if your pastor is being compensated fairly. Our compensation reports take into account the cost-of-living in your area and compare your pastor’s compensation to that of other churches with similar attendance and budgets. You can find more information about our compensation analysis here.

Another key component of retirement planning is succession planning. If you’re thinking about succession planning, and need help knowing what steps to take next, check out my book, Next: Pastoral Succession That Works, where I provide a roadmap for navigating this sometimes challenging time in life. You can also contact my team at Vanderbloemen if you’re ready to start the conversation about succession planning on your team.

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