As a pastor, your calling to serve your congregation often comes with unique financial challenges. While pastors are typically exempt from Social Security taxes, planning for retirement is still a critical part of long-term financial health. That’s where 403(b) plans come in — a type of retirement savings plan specifically designed for employees of tax-exempt organizations like churches, schools, and hospitals.
Choosing the best 403(b) plan for pastors can help ensure that you are saving effectively for the future. But with so many options available, it’s essential to find the plan that aligns with your goals, budget, and needs.
In this guide, we’ll look at the top 403(b) plans for pastors in 2024, highlighting key features, benefits, and things to consider when choosing the right plan for your retirement.
What is a 403(b) Plan?
A 403(b) plan is a tax-deferred retirement savings account available to employees of nonprofit organizations, including churches. It operates similarly to a 401(k) plan but is specifically designed for public school employees, government employees, and ministers in religious institutions.
Pastors can contribute to a 403(b) plan with pre-tax dollars, reducing their taxable income for the year. Funds in the account grow tax-deferred, meaning you won’t pay taxes on your contributions or earnings until you begin withdrawing the money in retirement.
Key Benefits of 403(b) Plans for Pastors:
- Tax-deferred growth: Contributions are made with pre-tax dollars, so you don’t pay taxes on your money until you retire.
- Higher contribution limits: For 2024, the contribution limit for 403(b) plans is $22,500 for those under 50 and $30,000 for those 50 and older, which is a substantial advantage for retirement savings.
- Employer matching: Some churches and religious organizations offer employer matching contributions, which can significantly boost your retirement savings.
- Roth 403(b) options: Some providers offer Roth 403(b) plans, which allow you to make after-tax contributions and enjoy tax-free withdrawals in retirement.
Top 403(b) Providers for Pastors in 2024
Here’s a breakdown of some of the best 403(b) plans for pastors based on key factors like fees, investment options, customer service, and flexibility.
1. Fidelity Investments: Best for Investment Choices and Low Fees
Why It’s Great for Pastors:
Fidelity is widely known for offering one of the best 403(b) plans for pastors because of its diverse investment options, low fees, and robust online tools. Fidelity allows pastors to invest in a wide variety of mutual funds, index funds, and ETFs, which can be customized based on your retirement timeline and risk tolerance.
Fidelity’s 403(b) plan also offers Roth options, which are ideal for pastors who want to make after-tax contributions and enjoy tax-free withdrawals in retirement.
Key Features:
- Wide range of investment options: Mutual funds, ETFs, and individual stocks.
- Low fees: Fidelity’s funds have lower expense ratios, meaning more of your money stays invested.
- Roth 403(b) option: Make after-tax contributions and withdraw tax-free in retirement.
- Robust online tools: Track your savings and manage your account easily.
- No annual fees: You won’t pay annual maintenance fees for having a 403(b) account.
Why Pastors Love It:
- Extensive selection of low-cost investment options.
- Excellent customer service for planning and account management.
- A trusted, reputable company with strong retirement planning tools.
Where to Buy:
- Fidelity Website
- Contact your church’s retirement plan administrator to see if Fidelity is already an option.
2. Vanguard: Best for Long-Term Investors with Low Costs
Why It’s Great for Pastors:
Vanguard is renowned for its low-cost index funds and strong long-term performance, making it one of the best choices for pastors looking for steady growth with minimal fees. Vanguard’s 403(b) plan is ideal for long-term investors who prefer a more hands-off approach to retirement savings.
With Vanguard, you can invest in a variety of target-date funds, index funds, and actively managed funds, all with some of the lowest expense ratios in the industry.
Key Features:
- Low-cost funds: Vanguard is known for its low-cost, high-performance index and mutual funds.
- Target-date funds: Automatically adjust your asset allocation based on your retirement timeline.
- Roth 403(b) option: Enjoy tax-free withdrawals in retirement with after-tax contributions.
- Strong historical performance: Vanguard’s funds have been among the top performers in the industry for many years.
Why Pastors Love It:
- Low fees and affordable index funds.
- Ideal for those who prefer long-term, low-maintenance investing.
- Vanguard’s customer service is very helpful for investment guidance.
Where to Buy:
- Vanguard Website
- Contact your church’s retirement plan administrator to check for availability.
3. TIAA: Best for Pastors with Large Employer Contributions
Why It’s Great for Pastors:
TIAA (formerly known as TIAA-CREF) is a leading retirement provider with a special focus on nonprofit organizations and churches. TIAA offers 403(b) plans that are well-suited for pastors looking for a robust, tax-deferred retirement plan with strong employer contribution matching.
TIAA’s 403(b) plan offers a wide range of investment options, including annuity contracts that provide guaranteed income in retirement.
Key Features:
- Employer contribution matching: Many churches match employee contributions, which can significantly boost your retirement savings.
- Guaranteed income options: TIAA offers annuity options that provide guaranteed income in retirement.
- Diverse investment options: Mutual funds, annuities, and real estate investments.
- Roth 403(b) option: Make after-tax contributions with tax-free withdrawals in retirement.
- Customer support: TIAA provides dedicated support for pastors and employees of nonprofit organizations.
Why Pastors Love It:
- Employer matching contributions are available for many churches.
- Strong annuity options provide peace of mind and predictable retirement income.
- Excellent resources for retirement education and planning.
Where to Buy:
- TIAA Website
- Check with your church’s human resources or plan administrator to see if TIAA is available.
4. GuideStone Financial Resources: Best for Christian Ministry Employees
Why It’s Great for Pastors:
GuideStone is a specialized financial provider focused on serving the retirement needs of those in ministry, including pastors. If you’re a pastor working for a church, GuideStone’s 403(b) plans are designed specifically for you, offering a range of retirement options catered to ministry professionals.
GuideStone is well-regarded for its spiritual values-based investing, allowing pastors to invest in funds that align with Christian principles.
Key Features:
- Faith-based investment options: Invest in mutual funds that align with Christian values.
- Employer matching: Many churches partner with GuideStone and offer matching contributions.
- Educational resources: Access to retirement planning guides, webinars, and personal advisors.
- Roth 403(b) options: Make after-tax contributions and enjoy tax-free withdrawals.
Why Pastors Love It:
- Christian-based investment options that align with personal faith.
- Easy-to-use resources and retirement tools tailored to pastors.
- Employer matching can significantly increase retirement savings.
Where to Buy:
- GuideStone Website
- Speak with your church’s HR department to learn about GuideStone’s availability.
5. Charles Schwab: Best for Comprehensive Investment Tools and Advice
Why It’s Great for Pastors:
Charles Schwab offers 403(b) plans with comprehensive investment tools, low-cost options, and a wealth of personalized advice for individuals seeking to save for retirement. Schwab’s 403(b) options are known for their flexibility and extensive financial planning tools.
Whether you’re looking for simple index funds or more sophisticated investment strategies, Schwab has a variety of options for pastors of all experience levels.
Key Features:
- Low-cost index funds: Schwab offers some of the most affordable index funds in the market.
- Comprehensive financial advice: Schwab provides access to certified financial planners to help you manage your retirement plan.
- Roth 403(b) options: Available for after-tax contributions and tax-free withdrawals.
- Wide variety of investments: From low-cost mutual funds to individual stocks and bonds.
Why Pastors Love It:
- Schwab’s financial planners can provide personalized retirement advice.
- Low fees and access to a variety of investment tools.
- Excellent customer service and retirement resources.
Where to Buy:
- Charles Schwab Website
- Contact your church’s retirement plan administrator to check availability.
Conclusion: Best 403(b) Plans for Pastors in 2024
Choosing the right 403(b) plan is a crucial decision in ensuring a comfortable and financially secure retirement. Here’s a quick rundown of the top options:
- Fidelity Investments – Best for investment choice and low fees.
- Vanguard – Best for long-term, low-cost investing.
- TIAA – Best for large employer contributions and guaranteed income options.
- GuideStone Financial – Best for faith-based investments.
- Charles Schwab – Best for comprehensive investment tools and financial advice.
Consider your personal financial goals, your church’s contribution policy, and your investment preferences when choosing the best 403(b) plan. With the right plan, pastors can confidently prepare for a secure and fulfilling retirement.