Avoiding the Social Security Earnings Ceiling for Ministers 62 and Up

If you are retired and receive Social Security retirement benefits you may lose some or all of those benefits unless your “earned income” is below specified Earnings Ceilings.

For 2017 that amount is over $16,920 for workers age 62 to 66. If you’re over age 66, you may earn as much as you want without losing any Social Security benefits. However, you may pay income tax on Social Security benefits as your income increases.  In the year that you turn 66 you’ll enjoy a higher earnings ceiling (of $44,880 in the year 2017).

Income counted toward the Earnings Ceiling would include:

Ministry Salary, Honoraria, Housing Allowance, Parsonage Rental Value, Social Security allowance paid by the church, other secular work income or any other income from work.

Income not counted toward that ceiling includes:

Interest and dividends, Pensions, IRA’s, TSA’s or Annuities, any rental income and capital gains.

Also, church payments that do not count towards the ceiling include medical insurance for the worker and family. (Medical expenses reimbursed under a properly established Medical Reimbursement Plan will typically cover out-of-pocket expenses, such as deductibles, co-insurance amounts, dental care and eyeglasses).  Payment of other ministry expenses such as automobile mileage, meals, entertainment, books, seminars, etc. also do not count.  Money set aside by the church for a “Rabbi Trust” or  church payments to a 403(b) Retirement Plan is also excludable from the Earnings Ceiling.

Any time we mention a 403 (b) retirement plan to pastors, we feel that  we must emphasize this:  If your 403(b) is a regular secular plan and not a denominational plan or the Clergy Advantage 403(b) Retirement Plan, we strongly recommend that you call us or attend our next  “Tax Free Money for Ministers” webinar to see why this is so important.   There is no charge for ministers, pastors and/or their spouses.

Also note this potential pitfall:  If your church sets aside funds in a deferred compensation account in the church name to pay out in a later year, this must generally be treated as income in 2017, even if it’s not paid to you until 2018. We’ll elaborate on this if you need more information. There are two exceptions, already mentioned above: the 403(b) retirement plan and a Rabbi Trust, if done correctly.

For a great, detailed explanation of  Social Security benefits and strategies, you’re welcome to attend our “Transforming Social Security in a Winning Retirement Strategy” webinar.  These webinars are free to all pastors and their spouses. Click Here to get more information.