The non-profit equivalent of a 401(k) account is called a 403(b) account. If you have ever had a 401(k), then you know how it works. Unless your church is very large, I can almost guarantee that this will not be the best choice for you.

What I like about 403(b) accounts is that there is a lot more flexibility for increased contributions from both the pastor and the church. What I hate about 403(b) accounts is that they are MUCH more complicated to operate and administrate than either a SIMPLE IRA or a SEP IRA, and I would not recommend creating such a plan without the direct help of both an accountant and a tax professional. Personally, I think that most churches (particularly small and medium sized churches) have a better option.

A lot more could be said about the intricacies of and requirements surrounding 403(b)s. Since I am not an accountant, tax professional, or certified financial planner, you should definitely seek counsel from one or more of these individuals before deciding on which plan is best for you and your church.

For a nice overview of 403(b)s, click here.

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Pastors are so good at so many difficult things - preaching/teaching, counseling, discipling, caring - but can very often be completely clueless when it comes to handling their money wisely. This can be true of their day-to-day finances, but is often more true in regards to their retirement planning.

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