As we prepare to head into the final quarter of the year, it’s the perfect time to review your finances. At MMBB Financial Services we believe in the importance of financial planning to ensure a secure future. An annual review of your financial plan will help determine if you are on track to achieve your goals or if you need to reset your priorities.
The article, “Year-End Tax & Retirement Planning Strategies includes valuable information on income tax planning, retirement planning and other year-end financial planning considerations.
Many of you are preparing for discussions about your compensation for 2017. Margaret Marcuson looks at compensation from the pastor’s and church’s point of view in “How to Talk Compensation with Your Church.” She provides tips that are sure to make this often sensitive conversation a lot easier.
Approximately 15 million Americans are targets of identity theft each year and monetary losses can run into the billions of dollars. The rise in online shopping during the Christmas season has increased the opportunity for cyber thieves to access personal identifiable information more readily. “Protecting Yourself Against Identify Theft” includes helpful advice to minimize the likelihood that you will be victimized.
With the rise in popularity of online fundraising more and more churches are offering online giving as an option. “Churches and Online Giving” examines this growing trend and includes important information to help churches and congregations benefits from this valuable tool.
In the final installment of our three-part series, “Caring for Your Aging Parents” we examine financial concerns that both you and your parents need to keep in mind as well as provide a helpful checklist to reference when caring for your loved ones.
To everything there is a season and a time to every purpose under heaven. Summer is behind us, the children are back in school, students are back at college, church programming starts up and we look to the Fall revitalized by our vacations and time of relaxation. Let us move toward the end of the year focusing our energy on the busy season ahead.
It is our privilege to serve those who serve so faithfully.
Louis P. Barbarin, CPA
Chief Executive Officer
By Margaret J. Marcuson
Many clergy hate to talk about compensation with their churches. We are defensive about the percentage of the budget that is our salary and benefits. We feel greedy if we ask for more, even if we are struggling financially. Or we feel resentful that we are not being paid enough.
Here’s another way to look at it: conversations about compensation are an opportunity to grow. Let me suggest three ideas to consider:
First, be bold when you are hired. In What Color Is Your Parachute? Richard Bolles says this is the time when you have the most leverage, because they want you. When you are excited about a call, it’s easy to hold back, or think, “I’ll ask for that later.” Don’t wait.
It’s a tricky balance—it’s true that congregational ministry is not as well paid as other fields. Have a sense of the salaries that are available, especially if you are a second career minister coming from another field. However, those who don’t ask, especially up front, don’t get. One reason clergy are underpaid is they are afraid to ask for more. Know your own needs. Do the math on your cash flow, and be realistic about housing costs in the area. If you have educational debt, factor that in. You need a salary you can live on. And make sure and complete the details of your compensation in writing before you agree to accept the call.
Rev. Robert Prescott-Ezickson, pastor of First Baptist Church, Long Branch, New Jersey, has thought long and hard about compensation questions. He suggests using the contracting process as a teaching tool. If you truly want to come to a church and the money simply isn’t there, you can include a phrase such as, “This will be implemented when the church is able.” In any compensation conversation, he recommends, “Put on the full armor of God.” He also says, “We’re not supposed to be thinking about money, we’re not supposed to be greedy, but at the same time, we’re the only ones who are going to be able to advocate successfully for salary.”
Second, at budget time, take responsibility for your own salary. Don’t sit back and wait for them to offer you something. Request what you want. When I was a pastor, I used to sit back and wait. I did much better after I started making specific requests. It was uncomfortable for me and for them. Yet I was able to move my salary up incrementally over the years, and it benefited our family (and my tithe to the church was correspondingly greater). I started doing this not simply because I wanted a better salary. I also knew I would grow if I could step out more boldly. No one else can advocate for you like you can. Prescott-Ezickson says, “I’m the only one who knows how much I need to be able to live. We need to be a little bold about it—not rude, but bold. Have the courage to sit down and have the conversation, adult to adult.” He recommends taking advantage of MMBB materials as a neutral party to help the conversation.
If money is tight, be creative: consider asking for something else instead of an increase, such as an additional week of vacation. “For me, that was just as valuable as a decent raise,” says Prescott-Ezickson. In addition, make sure you are getting the maximum tax benefit from the money you do receive.
Prescott-Ezickson also suggests using the Bible as a support: “The laborer deserves to be paid.” (1 Tim. 5:8b) It’s not just about the money, but there are wider issues. “Both churches and ministers need to think in terms of justice.” The educational requirements for ordination are significant, and the debt burden can be substantial. MMBB suggests that you make the comparison with other professions. For example, teachers in the community may be a good apples-to-apples comparison, with similar educational requirements.
Claim the value of your own work and ask your leaders to support you in it. You are paid your salary to be the leader of the congregation. You can confidently and unapologetically ask others to support that work, not only in stewardship preaching, but also in budget conversations. This is an exercise in self-definition and an opportunity for growth. Easy? No, but it’s important: not simply for you, but for them to step up to their responsibilities in supporting their leadership.
Third, if money is tight, and your church is looking to cut the budget, don’t volunteer to take a pay cut. Many pastors overfunction for their congregations by balancing the church budget on their own backs. If a congregation is facing a financial challenge, it needs to be a shared responsibility.
In addition, Rev. Steve Hasper of First Baptist Church, Pasadena suggests that you use your contract to hold people to account when they want to cut the pastoral budget. When they say, “We’re going to cut this,” he recommends you say, “No, we have a written agreement.” Hasper also suggests tracking the percentage of the budget that is spent on various parts of the ministry, including building and staff. “For smaller churches, getting down to 50% on personnel will not be possible,” Hasper says. These conversations are opportunities to educate your people. Avoid getting angry or defensive. Think of it as an opportunity for self-definition and leadership.
Now, there may be times when a pastor will be faced with a pay cut. Remember, this is another negotiation. Make sure that you work fewer hours. Don’t agree to do the same work for less pay. If you do this, you are keeping the church from facing the consequences of their decisions (and their giving).
Compensation conversations can be challenging for clergy and church leaders. Here are five final tips: * Remember: “You have not because you ask not.” (James 4:2) * Don’t be defensive or take people’s responses personally. Mostly, it’s not about you, but about their fear and anxiety. * Be clear about your own bottom line: what you must have to take the position or continue. * Be grateful for your salary, even if it’s not all you would like. * Love them no matter what.
Margaret Marcuson helps clergy and churches energize their ministry and fund their vision. She speaks and writes on leadership and works with faith leaders nationally as a consultant and coach. An American Baptist minister, she was the pastor of the First Baptist Church of Gardner, Massachusetts for 13 years. Get the free mini-course “Six Shifts to Sustain Your Ministry.” at http://www.margaretmarcuson.com
With the warm days of summer officially behind us and the end of another year fast approaching, now is the time to prepare for 2017. Planning for the future is as challenging as ever as the rapid changes in our markets, economies, and policies continue to demand our attention. The world around us is evolving at perhaps a faster pace than ever before. MMBB is here to help as you prepare for today and tomorrow with income tax and retirement planning strategies designed for pastors and church workers.
As the November elections approach, we are reminded that election years present some distinct planning challenges. There is no shortage of theories predicting how election results will impact the stock market, tax code, employment, healthcare, social security or your personal finances. Despite the intense speculation, we encourage our members to focus on what we can control, starting first with a financial plan built around your goals and objectives.
Income Tax Planning is an essential component of year-end financial planning. Three areas that you need to consider when looking at income tax planning are The Housing Allowance, itemized deductions and charitable contributions.
The Housing Allowance
This important tax benefit must be designated prior to the year in which it will apply. Be sure that your church officially designates a housing allowance for 2017 before the year ends. Ordained ministers who own or rent their home are entitled to receive the housing allowance. The federal tax code provides clergy with a tax exemption on the portion of their compensation that is designated as a housing allowance. However, it is considered taxable income for Social Security and Medicare. For detailed information on the Housing Allowance Advantage, visit the MMBB website http://www.mmbb.org/our-services-plans/housing-allowance-advantage/.
Maximize Itemized Deductions
Although it is easier to take the standard deduction, according to Intuit Inc. which produces the popular tax and financial software, TurboTax and Quicken, one of every four taxpayers can lower their tax bill by itemizing deductions. To determine whether this benefit applies to you, review the allowable expenses you have paid so far in 2016. Allowable expenses include, but are not limited to, home mortgage interest and property taxes, state income or sales taxes, medical expenses, charitable donations, work-related magazine subscriptions, uniforms and tuition for classes related to job improvement. Ministers who own their homes and itemize their deductions are eligible to deduct mortgage interest and property taxes on Schedule A, even though such items were excluded as part of the housing allowance exclusion. This is the so-called double-deduction. Remember that medical expenses can only be deducted to the extent that unreimbursed expenses exceed 10% of your Adjusted Gross Income (AGI). (For those who turned 65 during the tax year or are 65 years or older the percentage is reduced to 7.5% of AGI.)
As always, your charitable contributions must be made prior to December 31 to be taken as a deduction on this year’s return. If you intend to make charitable gifts, consider gifting appreciated stock as an alternative to cash donations. By gifting appreciated securities, you will avoid paying capital gains taxes on securities held for more than one year. To learn more, consult an MMBB Certified Financial Planner™ professional.
Retirement Planning is another key component of year-end financial planning. There are several elements of retirement planning that should be reviewed each year, even if you are retired.
Required Minimum Distributions (RMD)
Federal law requires that at least a minimum amount, known as a required minimum distribution (RMD), must be withdrawn from retirement account balances when the account holder reaches age 70 ½. MMBB members will receive their first RMD by April 1 of the year you reach age 70 ½. In subsequent years, you will receive your RMD by December 31. The start of RMDs from MMBB-administered accounts can be delayed until April 1 following the year employment ceases if you are still employed at or beyond age 70 ½ by an eligible employer within ABCUSA or an affiliated group for which MMBB administers its plans.
Retirement Plan Contributions
Most Americans can save more towards retirement. If you have not maximized your contribution to your retirement account, consider doing so to lower your taxable income. For the 2016 tax year, the IRS allows employees to contribute up to $18,000 to their 401K and 403(b) retirement plans. Those over age 50 can make an additional catch-up contribution of $6,000. Keep in mind that any contributions you make within IRS allowable amounts are tax deferred until after you retire or begin taking withdrawals.
The Special Church Election allows churches to contribute to the retirement plan of its employees when either the employee has a very low compensation or a very high housing allowance. Under the rule, the church can contribute up to $10,000 per year even if the pastor does not have that much in cash compensation. The lifetime maximum is $40,000.
Remember to make your allowable 2016 contributions before year-end. If you are unsure, check with your accountant or Certified Financial Planner™ to determine your 2016 maximum allowable contribution.
Portfolio Review and Rebalance
Other Year-End Financial Planning Considerations
Health Savings Accounts (HSA) & Flexible Spending Accounts (FSA)
Remember to submit all of your qualifying medical claims for 2016 as soon as possible for reimbursement. Many plans now allow participants to carry over part of their FSA balance into the following year and submit 2016 claims in early 2017, however, plans are not required to do so. Always check with your plan administrator to find out you’re the applicable deadlines. For those of you with a qualifying high deductible plan, consider funding a Health Savings Account. Health Savings accounts are triple tax exempt (i.e. contributions are on a pre-tax basis, earnings grow tax deferred and qualifying distributions are tax free) making these accounts particularly valuable.
Beneficiary Designation Review
Year-end is an excellent time to review your beneficiary designations on all accounts. Accounts and contracts that should have beneficiary forms on file include:
Meet with Your Financial Advisor
Whether they’re snatching your purse, diving into your trash, stealing your mail, or hacking into your computer, they’re out to get you. Who are they? Identity thieves. Identity thieves can empty your bank account, max out your credit cards, open new accounts in your name, and even make purchases based on your credit history. And what will you get for their efforts? You’ll get the headache and expense of cleaning up the mess they leave behind.
As we move towards the holiday season, keep in mind this is prime time for thieves to prey on unsuspecting victims. We offer the following preventative measures to help combat identity theft.
Check yourself out
It’s important to review your credit report periodically. Check to make sure that all the information contained in it is correct, and be on the lookout for any fraudulent activity.
You may get your credit report for free once a year. To do so, visit http://www.annualcreditreport.com.
If you need to correct any information or dispute any entries, contact the three national credit reporting agencies: Equifax, Experian, and TransUnion.
Secure your number
Your most important personal identifier is your Social Security number (SSN). Never carry your Social Security card with you unless you’ll need it. The same goes for other forms of identification that display your SSN. If your state uses your SSN as your driver’s license number, request an alternate number.
Don’t have your SSN preprinted on your checks, and don’t let merchants write it on your checks. Don’t give it out over the phone unless you initiate the call to an organization you trust. Ask the three major credit reporting agencies to truncate it on your credit reports.
Don’t leave home with it
Most of us carry our checkbooks and all of our credit and debit cards with us all the time. That’s a bad idea; if your wallet or purse is stolen, the thief will have access.
Carry only the cards and/or checks you’ll need for any one trip. And keep a written record of all your account numbers, credit card expiration dates, and the telephone numbers of the customer service and fraud departments in a secure place—at home.
Keep your receipts
When you make a purchase with a credit or debit card, you’re given a receipt. Don’t throw it away or leave it behind; it may contain your credit or debit card number. And don’t leave it in the shopping bag inside your car; if your car is broken into and the item you bought is stolen, your identity may be as well.
Save your receipts until you can check them against your monthly credit card and bank statements, and watch your statements for purchases you didn’t make.
When you toss it, shred it
Before you throw out any financial records or statements, cancelled checks, or even offers for credit you receive in the mail, shred the documents, preferably with a cross-cut shredder. If you don’t, you may find the panhandler going through your trash was looking for more than discarded leftovers.
Keep a low profile
The more your personal information is available to others, the more likely you are to be victimized by identity theft. Take these steps to help minimize your exposure:
Take a byte out of crime
Take steps to help assure your computer does not inadvertently reveal your personal information.
Install a firewall to prevent hackers from obtaining information from your hard drive or hijacking your computer to use it for committing other crimes. This is especially important if you use a high-speed connection that leaves you continuously connected to the Internet. Moreover, install virus protection software and update it on a regular basis.
Try to avoid storing personal and financial information on a laptop; if it’s stolen, the thief may obtain more than your computer. If you must store such information on your laptop, make things as difficult as possible for a thief by protecting these files with a strong password—one that’s six to eight characters long, and that contains letters (upper and lower case), numbers, and symbols.
Opening e-mails from people you don’t know, especially if you download attached files or click on hyperlinks within the message, can expose you to viruses, infect your computer with “spyware” that captures information by recording your keystrokes, or lead you to “spoofs” (websites that replicate legitimate business sites) designed to trick you into revealing personal information that can be used to steal your identity.
If you wish to visit a business’s legitimate website, use your stored bookmark or type the URL address directly into the browser. If you provide personal or financial information about yourself over the Internet, do so only at secure websites; to determine if a site is secure, look for a URL that begins with “https” (instead of “http”) or a lock icon on the browser’s status bar.
And when it comes time to upgrade to a new computer, remove all your personal information before you dispose of it. Using the “delete” function isn’t sufficient to do the job; overwrite the hard drive by using a “wipe” utility program. The minimal cost of investing in this software may save you from being wiped out later by an identity thief.
You may never be able to completely prevent your identity from being stolen, but following these steps will help protect yourself from becoming a victim.
In part two of this series, MMBB Financial Services offered resources to assist you with seeking professional advice and support regarding care for your aging parents. The final article in this series presents financial concerns and a helpful checklist to reference when caring for your loved ones. The checklist provides an overview of the information you need to consider and gather before making any permanent decisions.
Financial and tax considerations for you
Caring for your aging parents is not only an emotional burden for you but may be a financial one as well, depending upon how well off your parents are and how much caring for them costs. Because many adults today are becoming first-time parents in their thirties, and others are remarrying and rearing second families, increasing numbers of adults are finding themselves in the “sandwich generation.” They face having to pay expenses of growing children (including college expenses), plan for their own retirement, and support their aging parents financially. Thus, it’s important to plan not only your parents’ finances, but your own as well.
Financial planning for your parents
Making sure that your parents won’t outlive their money is a critical step in ensuring that your own finances will remain sound. In particular, you’ll need to make sure that your parent is receiving all the benefits to which he or she is entitled and that his or her money is invested wisely. You’ll also need to create a financial profile for your parents, a statement that includes income, expenses, and net worth. If, after considering your parent’s financial condition, it’s clear that they won’t have enough resources to pay for their own care, you’ll need to find ways to supplement their income. You may need to look at Supplemental Security Income (SSI), for instance, or ask other relatives for help. You’ll also have to determine how much financial support you can give your parents (see below).
Financial planning for you
Besides caring for your parents, you have a lot of other financial obligations. Before you can determine the best way to help your parents financially, you’ll have to look at your own financial picture. Not only will you need to consider your current expenses, but you’ll have to look down the road a few years, considering how much you’ll need to save for your own retirement and, perhaps, for your child’s education.
Tip: Due to the complexities inherent in providing adequately for several generations in the same family, consider seeking the advice of a financial professional such as the MMBB Certified Financial Planner™ professionals.
Tax benefits for children supporting aging parents
Federal income tax law provides several tax benefits to you if you are supporting your parents financially. If you have a dependent care account at work, you can put pretax dollars into the account that you can use to pay for some costs associated with caring for your dependent parents. You may be able to claim an exemption for your parents as dependents, and you may be entitled to claim a dependent care credit. In addition, you may be able to file your taxes as head of household and deduct medical expenses you paid for your parents. For more information consult your tax advisor.
Question about Social Security:
If you are financially supporting your parent, is he or she entitled to receive Social Security benefits based on your earnings?
If you are providing at least one-half of your parent’s support at the time of your death, and he or she is age 62 or over and is not entitled to a retirement benefit that is equal to or larger than the amount he or she would receive based on your earnings record, then he or she may be entitled to receive a parent’s Social Security benefit equal to 82.5 percent of your primary insurance amount (PIA). For more information on Social Security benefits, visit http://www.ssa.gov.
Caring for your Aging Parents Checklist
As servants of God, we are called to practice good stewardship and gracious giving is central to Jesus’ message.
Churches are increasing their use of technology and many provide online giving as an option. Statistics indicate that in 2011 only 14% of churches offered online giving but that grew to 42%. by 2015. Churches have embraced social media as an important way to connect with members and their communities and companies that provide web-based donation tools predict increased popularity as churches recognize advantages for congregants and for the church.
For Church members and visitors online giving can provide:
For Churches online giving can:
Online giving is not only used for the weekly offering; many churches are using online giving to raise funds for a variety of reasons from building campaigns to disaster relief. Whether your church is new to online giving or has been offering it for a while, here are some useful “Do’s” and “Don’ts” gleaned from traditional non-profit organizations.
DO…Keep your Message Short!
Keep your email solicitations short and to the point. Recipients don’t like reading long wordy e-mails. Include enough information to instruct individuals on how to make a donation, then provide links for them to obtain more information from your website. Speed is important—if it takes more than a minute to submit their gift, givers will GIVE UP.
DON’T…Bury your Online Giving Button.
If the button to donate is buried somewhere deep in your website, individuals won’t know that it’s there. Make the button visible on the home page with a direct link to your donation page. You should have a call to action for your online donation page linked to multiple places on your website.
DO…Give your Donors Options.
Just because individuals find you online doesn’t necessarily mean they want to give online. If you use a “Donate Here” button, make sure you also include your mailing address and instructions for making a contribution the old-fashioned way.
DON’T…Call it Something Different in Print and on your Website.
Keep your messaging and reference to online giving consistent. Whatever you’d like to call it, use the same language and approach. Do not make it puzzling by telling people to visit the church’s website to use your online giving program, and then the button says something different or does not provide proper instructions.
DO…Include Offline Contact Information
List a way for individuals to contact you directly or how to receive more information. Make sure your church includes a link to your website and your organization’s phone number in every fundraising email you send out.
DO…Keep the Process Simple
Ask only for the information you need to accept the gift. This is not the opportunity to get information to promote future ministry events.
DO…Be Sure to Say “Thank You”
Acknowledge their generosity and demonstrate your appreciation. Let givers know that their gift will be used to bless God’s people in a variety of ministries.
Have you already registered online to access your quarterly statement? If not, it is a simple, fast and convenient way to view your financial statements online. Simply go to www.mmbbaccounts.org, then you will be prompted to create an account. Be sure to have your preferred email information available. Remember the 2Q 2016 statement (which you received in July) is the last paper statement you will receive. All future statements with the exception of the Year End statement will only be available online.