In ministry work, it’s a common practice for pastors and other qualified ministers to opt out of Social Security. It’s a way to have more take-home pay, and if the money is invested and earns an above-average rate, then you can actually come out ahead. That is the common thinking. However, in practical application, things usually work out differently. Instead of being invested, the extra money is usually spent since wages often grow more slowly than the cost of living. When there are savings, they’re usually invested in a way that doesn’t yield a high enough return to offset the benefits that Social Security and Medicare can provide.

When you opt out of Social Security and Medicare, the benefits you lose are significant. There are two benefits that take effect upon reaching a certain age and two benefits that are effective throughout one’s life. The first and most commonly talked about benefit is the retirement benefits that one can receive if they pay into the system. Another benefit that you miss out on is free Medicare. If you opt out of Social Security, you will still qualify for Medicare; however, you will need to pay for certain parts while everyone else who paid into the system receives it for free. Two other benefits that are not as widely talked about are disability benefits, which you would receive if you were to be disabled and couldn’t work, and survivor benefits that your family members (spouse and children) would receive if you were to pass away.

The costs to replace these benefits are tangible as you would need to save for retirement, pay for Medicare, and purchase both life insurance and disability insurance just to replicate the Social Security benefits, in addition to any benefits you might want in excess of the minimum provided by what Social Security would pay out. Now, if you are prudent in making sure you save all of the extra take-home pay you receive and invest it properly over your whole working career, then you may be able to get out ahead by opting out of Social Security. However, a lot can go wrong with this plan. If the markets do not perform well, you will earn less money for retirement; if you go through a time where either income is lower, or expenses are higher, you may be tempted to use the funds to live instead of investing them. Another potential issue is if you have health issues along the way, the cost to renew an insurance policy may be more expensive, which may eat into your potential savings. There could be more potential issues. The ones listed above are just a few.

The decision to opt out of Social Security is a major life decision that comes with many considerations. While in some instances it is a good decision, sometimes it is not.

However, the one thing that is consistent is that God does call on believers to be good stewards. Everyone’s life circumstances are different, and for some families, that means they need to contribute to Social Security to ensure they will have a basic safety net; and for some, that means you opt-out and instead replicate those benefits through investing and private insurance benefits. Every situation is different, and we recommend that you take time to pray about the decision and consult with a qualified professional to ensure you make the right decision for you and your family.

1 Timothy 5:8: Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.