Retirement plans for pastors work differently than plans for other workers because of one feature almost nobody else gets: a retired minister can pull money out of a church retirement plan and designate part of it as a tax-free housing allowance. That single rule reshapes every other decision, from which account to fund first, to whether to roll old balances into an IRA, to how to think about opting out of Social Security. The 403(b)(9) church plan sits at the center of the picture, with IRAs and a few small-church alternatives filling in around it.
Why the 403(b)(9) Comes First
A 403(b)(9) is a defined contribution plan built specifically for churches and church-related employers. Contributions from the church and the minister grow tax-deferred, similar to a 401(k) or a standard 403(b).1eCFR. 26 CFR 1.403(b)-9 – Special Rules for Church Plans
The reason it matters more than any other account: the 403(b)(9) is currently the only retirement account from which a retired minister can take distributions designated as tax-free housing allowance under Internal Revenue Code Section 107. A retired pastor can designate a portion of pension or 403(b)(9) distributions as housing allowance and exclude that amount from gross income for federal income tax purposes, limited to the smallest of actual housing expenses, fair rental value of the home furnished and with utilities, or the amount the plan administrator officially designates in advance.2Internal Revenue Service. Publication 517 – Social Security and Other Information for Members of the Clergy and Religious Workers3Internal Revenue Service. Ministers’ Compensation and Housing Allowance
Distributions from a traditional IRA, Roth IRA, 401(k), SEP IRA, SIMPLE IRA, or any other non-church retirement account do not qualify. Roll a 403(b)(9) balance into an IRA and the housing allowance eligibility disappears permanently on those funds. For a pastor who will own a home or pay rent in retirement, that lost exclusion can mean thousands of dollars in extra federal tax every year. One planning note that couples often miss: the exclusion generally ends at the minister’s death, so a surviving spouse receiving the same plan distributions typically cannot continue to exclude them as housing allowance.
A practical consequence: keeping money in the 403(b)(9) through retirement usually beats rolling it to an IRA for more investment choices, even when the IRA looks better on paper.
How Much You Can Put In for 2026
A minister can defer up to $24,500 of salary into a 403(b)(9) plan in 2026. That limit applies across all 403(b) and 401(k) plans combined, so a second job with a 401(k) does not double the ceiling. Total annual additions from employee and employer combined cannot exceed the lesser of 100% of compensation or $72,000.4Internal Revenue Service. Retirement Topics – 403b Contribution Limits
Three catch-up provisions can raise a pastor’s personal limit:
- Ministers age 50 or older by year-end can add $8,000, bringing the deferral limit to $32,500.
- Ministers who are 60, 61, 62, or 63 during 2026 qualify under SECURE 2.0 for a higher catch-up of $11,250 in place of the standard $8,000. If prior-year FICA wages exceeded $150,000, that catch-up must go in as Roth (after-tax) contributions.
- A minister with at least 15 years of service at the same church or church-related organization can add up to $3,000 per year, capped at $15,000 over a lifetime. The available amount depends on prior contributions relative to the limits in effect at the time.5Internal Revenue Service. 403(b) Plan Fix-It Guide – 15 Years of Service Catch-Up Contributions
When both the 15-year service catch-up and the age 50 catch-up apply, deferrals above $24,500 count first against the 15-year catch-up, then against the age catch-up. A 55-year-old pastor with 20 years at the same church could defer up to $35,500 if the plan permits all three provisions and the lifetime cap has room.
When a 403(b)(9) Isn’t Available
Small congregations sometimes lack the capacity to run a 403(b)(9) on their own. Two simpler alternatives exist, though both give up the housing allowance benefit at retirement.
- A SEP IRA lets the church contribute directly to an IRA held in the minister’s name, up to the lesser of 25% of compensation or $72,000 for 2026. Only the employer contributes. Setup is essentially IRS Form 5305-SEP.6Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs)
- A SIMPLE IRA is available to organizations with 100 or fewer employees. It allows employee salary deferrals up to $17,000 in 2026 plus a required employer match of up to 3% of compensation, with low administrative cost and no annual filing.7Internal Revenue Service. Retirement Topics – SIMPLE IRA Contribution Limits8U.S. Department of Labor. Choosing a Retirement Plan for Your Small, Faith-Based Organization
A better route for a small church that wants housing-allowance-eligible retirement benefits is to join a denominational pension board. These boards pool resources across many congregations to run 403(b)(9) plans no individual church could administer alone, and most major denominations operate one. The pastor does not need to be at a large church to participate.
IRAs as a Supplement
A traditional or Roth IRA sits on top of the 403(b)(9), not in place of it. The 2026 contribution limit is $7,500, or $8,600 for those age 50 and older.9Internal Revenue Service. Retirement Topics – IRA Contribution Limits The traditional-vs-Roth choice mostly comes down to whether you expect a higher or lower tax bracket in retirement. Roth IRAs produce tax-free withdrawals and have no required minimum distributions during the owner’s lifetime.
One clergy-specific quirk works in the pastor’s favor. Housing allowance is excluded from federal income tax but still counts as earned income for IRA contribution eligibility. A minister whose compensation is largely structured as housing allowance still has enough earned income to make the full IRA contribution, even when the W-2 taxable box is close to zero.
If a spouse does not work outside the home, the minister can fund a spousal IRA using their own earned income as long as it covers both contributions. For 2026, a couple where both spouses are under 50 could contribute up to $15,000 across two IRAs; if both are 50 or older, the combined limit is $17,200. Roth IRA eligibility phases out for married couples filing jointly with modified AGI between $242,000 and $252,000.
Keep in mind, again, that IRA distributions do not qualify for the housing allowance exclusion. The IRA supplements the 403(b)(9). It does not substitute for it.
Social Security, SECA, and the Opt-Out Decision
Ministers hold an unusual tax status. The IRS treats an ordained, commissioned, or licensed minister as a common-law employee of the church for income tax purposes (W-2 wages), but as self-employed for Social Security and Medicare, meaning they pay the full 15.3% SECA tax on net ministerial earnings rather than splitting it with an employer.10Internal Revenue Service. Topic No. 417, Earnings for Clergy The housing allowance, though excluded from income tax, is included in the SECA base. Many churches pay a SECA allowance on top of salary to offset the burden, though that allowance itself is taxable.
A minister who is conscientiously opposed to accepting public insurance benefits on religious grounds can apply for an exemption from SECA on ministerial earnings by filing Form 4361.11Internal Revenue Service. Members of the Clergy Two things to weigh carefully before filing:
- The exemption is irrevocable. Once approved, a minister cannot later opt back in and earn Social Security credits on ministerial income.12Social Security Administration. Handbook Section 1131 – Exemptions From Self-Employment Coverage
- A minister who spends an entire career in ministry with no secular employment gives up both Social Security retirement benefits and Medicare Part A eligibility earned through work credits. The average Social Security retirement benefit is roughly $2,071 per month as of January 2026.13Social Security Administration. What Is the Average Monthly Benefit for a Retired Worker?
A pastor who opts out has to replace that income stream through private savings and plan their own path to health coverage. That reality pushes the required 403(b)(9) and IRA contribution levels considerably higher than they would be for a minister who stays in the system.
Getting Money Out
Required Minimum Distributions
Tax-deferred accounts eventually require withdrawals. RMDs currently begin at age 73, and under SECURE 2.0 the age rises to 75 for individuals born after 1959, taking effect in 2033.14Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) The first RMD is due by April 1 of the year after you reach the applicable age. Delaying that first payment to April means taking two RMDs in the same calendar year, which can push you into a higher tax bracket. For ministers coordinating distributions with housing expenses to maximize the exclusion, timing in these early years matters. Roth IRAs have no RMDs during the owner’s lifetime.
Early Withdrawals
Withdrawals from a 403(b)(9) or traditional IRA before age 59½ generally trigger a 10% additional tax on top of ordinary income tax.15Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Exceptions include permanent disability, death of the account owner, a series of substantially equal periodic payments, qualified birth or adoption expenses up to $5,000 per child, unreimbursed medical expenses over 7.5% of AGI, and emergency personal expense distributions up to $1,000 per year under SECURE 2.0.
One age-related rule matters especially for pastors who leave ministry in their late fifties: separation from service during or after the year you turn 55 allows penalty-free distributions from an employer 403(b)(9), but the rule does not apply to IRA withdrawals. A minister who has already rolled funds to an IRA loses that bridge.
The Rollover Question, Restated
Every retirement decision a pastor makes runs back to a single question: will these funds still qualify for housing allowance treatment when they come out? Money in a 403(b)(9) or denominational pension keeps that eligibility. Money in any other retirement account does not. Before signing paperwork to consolidate accounts, roll old plans over, or “simplify” balances into a single IRA, run the math on what the lost exclusion would cost across the years of retirement. In most cases, that number is large enough to answer the question on its own.