How To Tithe In Retirement

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That's faithfi.com and click Give. This is an on-board presentation of Faith and Finance. Tithing is fairly simple in your working years. Your only decision is whether to tithe on your net or gross income.

Hi, I'm Rob West. But tithing becomes a bit more complicated when you retire. Then it's deciding on net or gross income plus tithing on earnings alone or earnings and principal.

See what I mean? So we're bringing in an expert to help you make those decisions. And then it's onto your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Well, it's my pleasure to have Anthony Safer with us on the program today. He's a certified financial planner with One Degree Advisors, where they put together a handy resource to help you decide how to tithe in retirement. Anthony, great to have you with us.

Yeah, good to be with you, Rob. Now, I know you want to lay the biblical foundation for tithing in the first place, because some folks come down on different sides of this issue, whether or not tithing is still appropriate for us now that we're under the law of Christ versus the law of Moses. So, give us your thoughts on that. Yeah, tithing, we get to tithe. What a great opportunity to demonstrate worship, trust, and obedience to God. And as our friend Ron Blue likes to say, if you're not tithing, you're not experiencing financial freedom. The thing is, is that tithing was actually introduced in Genesis 14 before God gave the law to Moses, and so you see Abraham tithing to the king priest Melchizedek. And it's actually a great study in Hebrews 7, they talk about this specific incident in the New Testament, and I think it's just a great, you know, backing to show why tithing applies today. And even from Jesus's mouth in Luke 11 42, the way I read it is that he's telling the religious leaders, make sure you're tithing, but you're not neglecting love and justice.

Yeah. Well, I think you make a good point, though. It's what we get to do, not what we have to do. And I love what my friend Randy Alcorn says, that tithing is the training wheels of giving, because Jesus raises the bar in every area, and that includes our giving. But what a great starting point to give systematically and proportionately as an act of worship on God's provision. Well, I mentioned that tithing is easier during our working years than it is, perhaps during those retirement years.

So, explain why that is. Yeah, so tithing literally means a 10th. And so, it's often simple to calculate from our working income. If I earn $10,000, a 10th is $1,000. The math's pretty simple there. And so, some people do question, well, should I tithe from gross before tax or net after tax income?

And that's a personal decision that you'll need to make. I think that the first fruits principle would seem to apply to tithing prior to paying the government. But in either case, it's an easy calculation by applying that 10% to an income amount. So, many retirees choose to tithe similarly to how they do in their working years. They simply tithe on whatever income they do receive. But we started getting the question from some of our retired clients, well, how do I tithe in retirement just because my income sources vary in timing and composition and feature really some form of a return of principle? And that really led to many meaningful conversations.

Oh, I can imagine it did. And these are good hearted people who just want to honor the Lord appropriately in this season of life, and it can get complicated. I mean, there's multiple sources of income that each include a return of principle in this season, right?

That's right. And so that's why in the guide, we really highlighted five common income sources, Social Security, pensions, retirement accounts, brokerage investment accounts, and rental property income, just to name a few. So, as you imagine, it can get confusing. The guide's really not to try and tell people what to do, but really to provide a context so that they can apply it to their individual situation.

Hopefully, you can prayerfully apply a plan that's best and that you can have confidence in that. So one of the income sources, Social Security, let's just kind of go through those quickly. Social Security, you're paying in through your payroll taxes, right? And if you get a benefit statement from the Social Security website, you can actually see how much you've paid into that. A pension can be similar in the sense that you may be paying into that pension, maybe your employer is paying in as well.

It can be unique in each situation. A retirement account, such as an IRA, is generally made up of contributions plus some earnings or growth. And similarly, a brokerage account can be just like that. The main difference there is that you're paying taxes as you go and through as you're earning that.

Yeah. So then you have to decide if you want to tithe on earnings not yet distributed and possibly even tax-free income that doesn't show up on your tax return. Well, how do you handle all of this?

Well, we're going to take a quick break. When we come back, Anthony Safer will help us think through how you approach tithing in retirement. Much more to come just around the corner.

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We're talking today with Anthony Saffer. He's a certified financial planner with One Degree Advisors, and we're talking about tithing in retirement. It's simple during your working years, and you simply give a tenth on your increase. But what about in your working years where you have different kinds of income, and many of those income sources represent money you've already paid in and therefore tithed on, but also earnings and other forms of income coming back your way? It gets a bit more complicated. And Anthony, when we're transitioning into this season of life, it can be complicated, including the financial piece, right?

That's right. I mean, income sources are changing. Somebody's retiring, they're figuring out how to live with their time, and then their money aspects are changing. And so when it comes to tithing, that question of how do I tithe in retirement? There really are two options, at least as we see it. So one is pretty simple.

The other is a tad bit more complicated. But before personally deciding how to tithe in retirement, it can really be helpful to note your priorities. Are you aiming to keep things simple?

Are you willing to apply a little bit more detailed calculation to it? And perhaps you need to minimize tithing just to help make ends meet. In the case for more simple, you're really just tithing off what's deposited into your bank account plus adding any other money that's withheld, perhaps for taxes.

So let me give you a quick example. Let's say our friend Mary, she's retired, she wants to continue tithing to her local church. So every month she receives Social Security and then a distribution from her IRA. She simply adds up that income that comes into her bank account, adds back in any money that was withheld for taxes and applies that 10%. And there she has her tithe.

It's simple and it's impactful. Yeah. Well, what about some other examples, Anthony, like a pension?

That's right. So with a pension, it would be really the same thing in terms of what may hit a bank account. A lot of times if someone receives, let's just say $3,000 as their pension payment, they're just going to simply apply that $300 pension. If someone wanted to apply perhaps a more detailed calculation that said, hey, I paid in this much as principal and I've already tithed on that money, then they can break it down to say, well, how much have I contributed versus how much is actually growth or earnings that I'm now applying the tithe to? And we created a free resource that helps people basically sit down with each income source and really just apply a plan that's unique and personal to them.

Yeah, very good. So would you recommend then a percentage if somebody wanted to recognize the portion that's being returned to them and then just apply that percentage, whether that's from the Social Security statement or from the total contributions into your retirement plan to every check coming out? Yeah, absolutely.

So let's just take an example. And let's use an IRA account. So because this is common to a lot of people, so we'll go back to our hypothetical friend Mary, she has a million dollars in her IRA account, she's done a good job of savings. And because she's done it over many years, let's just say her principal is $250,000.

Those are her contributions. And then 750,000 is growth over the long term. So of that 75%, that's growth.

If you apply that to the principal, let's say she has a $4,500 IRA distribution, you apply 75% to that 4,500, which comes out to 3375. That's the earnings that she's actually getting from that. And then you can just apply your tithe to that same thing with something like Social Security or a pension.

Yeah. Is that where most of your clients come down? Or are most of them just taking the simple approach to say everything I get is a gracious gift from the Lord, whether or not a portion of it is a return of capital, and therefore I'm just going to tithe on everything coming in?

I'd say more people take the simple approach and they really want to create that impact. Sometimes it's harder for certain people that are trying to make ends meet. In either case, we need to be trusting the Lord through that. But I will say that it's never going to be exact. And you don't want to fall into that trap of feeling guilty over this.

Prayerfully go through it, talk with your spouse about it. And that's why having just a plan where you can have confidence, apply those calculations and then feel good about it. And if it's something where you are applying a percentage to it, often people will run with that percentage for quite a while or for their lifetime.

And they're confident in that. And then they can really just spend their time serving the Lord with not only their finances, but with their time and their heart. Yeah, that's really helpful. Let's take one other example. What about an income property, like a rental property? How would you help folks think about their tithing on that?

Yeah, good question. And a lot of times people will have rental properties when they are working and then that carries into retirement. So often they'll keep the same method that they have into retirement. But a lot of times, like if you're getting a gross income, let's just call it $2,000 a month in rental income, but you're putting in $500 of expenses, you treat it like a business. And so the $1,500 is really the income that's coming to you. And then people will often apply that percentage to the net income. Now, that can be changing on a year by year basis. So we do have a lot of clients that just simply say, hey, let's just apply the tithe to the gross income and let's make it simple.

Yeah, very good. I know you help folks with tax efficient ways to do their giving in retirement, what would be some of the most effective that you've seen? A lot's changed with tax reform, it seems like there's a new tax law every year. And especially in 2018, through the major tax reform, what we noticed was that obviously, a lot fewer people were itemizing their deductions, because the standard deduction had gotten so much higher.

Sure. And in talking with people, they, they didn't realize that they were not getting the tax benefit that they once were from their charitable giving. So we talked to people often about stacking your tithe, which basically just means supersizing it essentially in one year, and then the other year taking a standard deduction. And one way to help facilitate this is using appreciated stock to tithe in retirement, even a donor advised fund, such as with our friends with National Christian Foundation can be a great strategy. And then the third thing I would add, Rob is qualified charitable distributions from IRAs. These are can help fulfill those required minimum distributions. But honestly, it's just a really tax efficient way to give directly from your IRA.

Yeah, that's helpful. Now you mentioned a donor advised fund, we talk about them often. I refer to them often as a charitable checking account.

Will you give just a quick thumbnail sketch for somebody who's not familiar with that term? Yeah, it's a it's a giving fund. And so essentially, you can set that up with the community foundation, they act as the intermediary for that. And when we give over to a community foundation, it's essentially a completed gift at that point in time. And so it goes to the community foundation, which is a charity.

And that's really what determines the tax break. So I can supersize my giving in one particular year from a tax standpoint. But then I can further distribute that money later on, even though the money's with the foundation, as it says in the name, it's a donor advised fund. And so the community foundation basically takes your recommendations to give to the final charity, whether it be a church or another ministry.

Yeah, that's helpful. We've got about just 30 seconds left, Anthony. So tie a bow on the tithing for us. This is really about a conversation between you and the Lord not trying to check a box and making this legalistic, right? Absolutely. And that transition into retirement can be a big step for people.

And so having a plan can help give you that confidence, not only with tithing, but with those different retirement income sources, your time, you want to be able to go in there and have that financial freedom, as Ron Blue often talks about, so that you can serve the Lord faithfully. Well, that's really helpful. Anthony, so appreciate your time today. Thanks for stopping by, my friend.

Thanks, Ron. All right, folks, you can get access to this free tool in our show notes today. You can also learn more at OneDegreeAdvisors.com. That's OneDegreeAdvisors.com. Our guest has been Anthony Safer with One Degree Advisors.

What a great discussion. I know it's been helpful to you. All right, your calls are next, 800-525-7000. That's 800-525-7000.

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This is Faith and Finance. I'm Rob West. We're taking your calls today, 800-525-7000.

That's 800-525-7000, to Bowling Brook, Indiana. Hi, John. Thanks for calling, sir. Go ahead.

Thank you for having me. I was calling to hope to get maybe some simple tips on how I can get more involved in the budgeting in our house. My wife's the nerd and handles all the budgeting. You mean that in the most loving way, right? I do.

I'm just honest. Yeah. Well, God has wired us all differently, that's for sure. And I think the key is, I like the idea, John, of there being one bookkeeper, if you will, in your household. It certainly, I'll maybe describe that person just slightly different and say it's the person who's a little more detail-oriented, perhaps doesn't mind working on a spreadsheet every now and then, or in the case of our Faith Phi app, doesn't mind using a smartphone, but maybe enjoys the process of kind of working through the numbers and making sure everything balances. And usually, opposites attract, right? So, if that's the case for one spouse, oftentimes the other is completely the opposite. Maybe they're not as detail-oriented. Maybe they would rather just kind of know at a higher level, how are we doing this month?

But I don't want to get into all those numbers. And that's okay, because God puts us together to complete us, not to frustrate us as two become one. So, I think the key is, even though she's the bookkeeper, there needs to be a time, John, where you and she come together to really talk about, number one, where are we going? What are we ultimately trying to accomplish with God's money? What's important to us? You know, as believers, what are our values?

And what do we want to do in the area of giving? How much is enough for our lifestyle? How much do we want to be saving for the future? You know, all of those issues, because then the budget becomes really the roadmap to get you there. And the reason we make short-term sacrifices to rein in our spending is because we want margin to be able to accomplish those longer-term goals and objectives that really are aligned with our values and priorities as Christians. And then, maybe there's one person, like your wife, that's managing the day-to-day, paying the bills, making sure everything's on time, monitoring the envelopes, if you use the envelope system. But then I think what might be helpful for you is, in addition to that goal-setting time, maybe annually, or if not annually, perhaps it's as much as semi-annually, you're coming together monthly for what I call a money date, where you're looking at the budget that she's been managing all month, and you all together are making course corrections. So, that might be as simple as, hey, we've run out of money in our eating out envelope this month, so what are we going to do to get creative to get to the next month before we replenish that particular fund?

Hey, we're out of money in our gift-giving category, perhaps we need to bake something for the neighbor down the street who's celebrating a special event instead of giving a gift like we normally would. I mean, these are the kinds of things that, in your money date, you can do, so we're not trying to make you a bookkeeper, we just want to open lines of communication so you guys are on the same page. Does that make sense, Jon? It makes good sense.

Yeah, so I think there's two takeaways for you. Number one is, I think there should be a time annually where you all come together to do some longer-term planning. Praying first, asking God to really show you where he's leading you, talking about your values, what you want to be known for as a family and as a couple, and then allowing the budget to be a reflection of that on a monthly basis. And then, two, that money date where you come together, not to finger point, well, why did you spend that?

Why did you do this? It's really about how can we come together to look at where we're at for the month and talk about what changes do we need to make this month, and then what's coming up next month that we might want to anticipate? And having that monthly communication rhythm, I think, will really be a game changer.

Also, you may want to consider the Faithfi app where, you know, if she's managing the money and paying the bills, with the Faithfi app, you would be able to have a look into each spending category every month using the digital envelope system and see what's left in each category, which even though you may not want to be the one in all the details and pushing the buttons, you could still know exactly where you all stand every month as you're getting that set up. So, let's do this. You stay on the line. We'll get your information.

I'll make sure you get a six-month pro subscription to the Faithfi app, perhaps see if she'd be willing to use that for the next six months just to maybe take a different approach to managing your money, and that might allow you to have a better look into what's going on throughout the course of the month. John, stay on the line. We'll get your information, and thanks for calling today, sir. God bless you.

To Indiana. Hi, Joanne. Go right ahead.

Hi. My question is, I received Social Security disability, but I've also worked part-time for about the last 20 years while I was raising our kids. I'm a mom of five. Now that all the kids are out of the house, I've also received a promotion, and I've been offered a job that would require me to work full time at a salary that's about triple what I'm making right now, and I just want to be careful there because there have been times that I needed to be off work for a certain period of time, and I've used that Social Security disability, obviously, to help get through those times when I wasn't able to work, but I love my job, and it's something that physically I'm pretty sure I'm going to be able to do because it's very flexible, and that's always been the key with me that I need something that's flexible. So I'm just wondering, in salary negotiations, what amount will be wise? I know there's a risk there.

Sure. Well, at $17,000 a year, you're below the income limit for Social Security disability. The income limit this year for 2023 is $1,470 a month for most disabilities.

It goes up for blindness. So taking the promotion would, of course, make you ineligible for disability benefits, but if you take the job, you'll be making a little more than twice the highest income limit for disability benefits. If you can work, I would say take the job and do the work. If it turns out it's too much for you, you could request that your benefits be reinstated.

In fact, you wouldn't even have to reapply. Social Security Administration will even give you six months of provisional benefits while they re-evaluate your situation. So I would say, you know, if it were me, just if you have the ability to do the work, it sounds like you love it and, you know, the Social Security disability is there when you need it and qualify for it, and clearly that's been the case in the past. But if you have the ability to do this new work, I'd say go for it.

And if you find it is too much based on, you know, whatever's going on health-wise, then you could be reinstated. All right. Well, that's kind of the way I was leaning and that's kind of what I hoped you would say. So thank you very much.

Well, you're welcome. Tell me what you do. What is the kind of work you're doing?

I do corporate training for 10 restaurants. Very much worked my way up there and, you know, it's a great job. That's great, Joanne. Well, thanks for being a part of the program today. God bless you. Just before we go, I want to remind you, send in your donation of any amount and we'll send you the book Leverage Using Temporal Wealth for Eternal Gain. Send us your donation today. Simply go to faithfi.com. Thanks for joining us today. I'll look forward to talking with you again next time on Faith and Finance.