If you’re a church employee, minister, or work for a church-affiliated organization, chances are your retirement plan is a 403(b), and more specifically, a 403(b)(9) plan. While it operates similarly to traditional employer-sponsored retirement plans, there are some unique features, tax advantages, and strategic opportunities that make it especially important to understand as you approach retirement.
What Is a 403(b)(9) Plan?
A 403(b)(9) is a retirement plan designed specifically for employees of churches and certain religious organizations. Unlike a typical 403(b), a 403(b)(9) is classified as a “church plan” and is exempt from many ERISA regulations. This allows for greater flexibility in how the plan is structured and administered. However, it also means that the plan’s rules including investment options and eligibility can vary more from one church to another.
Tax Advantages for Ministers
One of the biggest advantages for ordained ministers is the ability to designate a portion of 403(b)(9) withdrawals in retirement as a housing allowance. This amount can be excluded from taxable income, even after retirement, if done correctly. It’s a powerful tax-saving tool, but it must be declared annually and handled in compliance with IRS rules, which is why working with a knowledgeable advisor is crucial.
Pre-Retirement Contribution Strategies
As retirement approaches, it’s important to review your contribution levels. For 2025, you can contribute up to $23,500 annually, with an extra $7,500 catch-up contribution if you’re age 50 or older. If you’ve worked for a church for 15 years or more, your plan may also offer an additional catch-up provision of up to $3,000 per year for five years. This is an excellent way to boost your retirement savings in the final stretch.
Choosing the Right Investments
Church 403(b) plans typically offer mutual funds, annuities, or faith-based investment options. As you get closer to retirement, it’s wise to revisit your investment allocations and ensure they align with your risk tolerance, income goals, and timeline. Diversifying across growth and income-generating investments can help you balance long-term security with short-term needs.
Work With Someone Who Understands Church Plans
Whether you’re just a few years away from retirement or already taking withdrawals, planning around a 403(b)(9) requires specialized knowledge. From housing allowances to plan design quirks, church retirement planning has its own language. A financial advisor experienced in faith-based and nonprofit retirement planning can help ensure your retirement strategy honors both your financial goals and your ministry.
Want help reviewing your 403(b) strategy? Reach out today to schedule a complimentary retirement planning session.
