Contributions are sometimes income-tax deductible
Earnings are tax-deferred
Distributions are generally taxable
Typical federal tax savings on $4000 of contributions:
$600, but only if you’re eligible to deduct the contributions Tax treatment of distributions after age 59½:
Taxable Annual contribution limit:
$6,000 ($7,000 if over age 50)
Distributions are generally not taxable after age 59½
Contributions can be withdrawn any time without tax or IRS penalty
Earnings can be withdrawn tax-free after age 59½
Typical federal tax savings on $4000 of contributions:
$0 Tax treatment of distributions after age 59½:
Non-taxable Annual contribution limit:
$6,000 ($7,000 if over age 50)
Contributions avoid income tax
Earnings are tax-deferred
Avoids Social Security tax for clergy but not for lay workers
Typical federal tax savings on $4000 of contributions:
$1200 for clergy, $600 for other workers Tax treatment of distributions after age 59½:
Taxable Annual contribution limit:
$20,500 ($27,000 if over age 50) in addition to employer contributions
Contributions avoid income tax
Earnings are tax-deferred
Avoids Social Security tax for clergy but not for lay workers
Up to 100% of proceeds can be tax-free housing allowance even before retirement
Typical federal tax savings on $4000 of contributions:
$1200 for clergy, $600 for other workers
Tax treatment of distributions after age 59½:
For clergy, up to 100% of distributions can be tax-free housing Annual contribution limit:
$20,500 ($27,000 if over age 50) in addition to employer contributions
Retirement benefits and options are so different for ministers. You need a clergy retirement plan that allows you to save state, federal and Social Security tax on contributions, grow the money tax-free and then provide tax-free distributions through your housing allowance. And that’s only the beginning with qualified clergy specialists in your corner.
Portability means keeping your Housing Allowance distributions for Life. The Clergy Advantage 403(b) Retirement Plan allows a minister to remain in the plan and keep housing allowance distributions even if you separate service, take another position or leave ministry altogether. That’s pretty good news, but that’s not all.