When someone starts ministerial work one of the immediate questions they are presented with is if they should opt out of social security or not. While that is an important decision that shouldn’t be taken lightly, there are options out there that can help you receive the social security benefits while minimizing the amount of tax you pay. One of those solutions is for a ministerial employee to make contributions to a company sponsored retirement plan.

Regular employees pay social security tax on their gross pay before retirement contributions are made, however a ministerial employee pays the social security tax as if they were self-employed. This means that for a minister the social security tax is calculated on the net pay after the employee’s company-sponsored retirement plan contribution. It’s important to note that a retirement plan contribution made to a non-employer sponsored retirement plan like a traditional IRA does not provide the same deduction for social security tax purposes.

Then, once the minister reaches retirement age, they will be able to withdraw the appreciated value of those contributions without needing to pay social security tax on that amount. While income tax on the amount withdrawn is still required, individuals with a 403b may be able to claim a housing allowance deduction against the taxable distribution and potentially reduce the income tax liability as well.

The savings on social security taxes can add up to a substantial amount. As an example, if a minister has a 30-year working career, earns $75,000 a year, and contributes $6,000 a year to a traditional IRA and another minister earns and contributes the same amount to an employer-sponsored plan for the same number of years plus the savings they would receive by being on the employer plan, the minister who is contributing to an employer-sponsored plan would have approximately $68,034 more in retirement savings than the minister that contributes to the non-employer sponsored retirement plan. So, as you are starting to prepare for filing your taxes, don’t just compile paperwork and file. Spend some time planning, becoming educated on the best practices, and consulting a professional if needed. The benefits of some of those savings may be small year over year, but significant over one’s working career. The example above is just one instance of how a small change—from making an individual retirement plan contribution to moving it over to an employer-sponsored retirement plan contribution—can make a big financial difference.