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How To Tithe In Retirement
Episode 289
The following is an encore presentation from 2023.
Tithing is fairly simple in your working years. Your only decision is whether to tithe on your net or gross income. But tithing becomes a bit more complicated when you retire. So we’re bringing in an expert to help simplify things today on Faith and Finance.
- Anthony Saffer is a Certified Financial Planner with One Degree Advisorswhere they’ve put together a handy resource to help you decide how to tithe in retirement.
WHY TITHE?
- Let’s start by laying the biblical foundation for tithing because some folks will argue that Christians today are no longer under that law.
- Tthing is an act of worship that demonstrates trust and obedience to God. Key biblical verses to study include, Genesis 14:20, Hebrews 7:4-10, Leviticus 27:30-32, Luke 11:42, and Malachi 3:8-10.
- The practice of tithing, as introduced in Genesis 14 precedes God’s law given to Moses to guide Israel. Hebrews 7 of the New Testament refers to the event of Abraham tithing to the Priest and King, Melchizedek.
- Jesus refers to tithing in Luke 11:42, admonishing the religious leaders who are meticulously calculating their tithe while neglecting love, mercy, and compassion.
WHY IS TITHING EASIER DURING YOUR WORKING YEARS?
- Tithing, which literally means a “tenth,” is often simple to calculate from working income. If someone earns $10,000, a tenth would be $1,000.
- You may question whether you should calculate the tithe from gross (before-tax) or net (after-tax) income. You’ll need to make this personal decision; although, the “first fruits” principle (Leviticus 23:10, 2 Chronicles 31:5), would seem to support tithing prior to paying the government.
- In either case, this is an easy calculation by applying 10% to an income amount.
- Many retirees choose to tithe similarly to how they did in their working years. They simply tithe on whatever income they receive. This can be a simple solution.
WHEN TITHING IN RETIREMENT SEEMS MORE COMPLICATED
- Questions often arise among retirees about how to tithe in retirement. This is usually because income sources can vary in timing and composition.
- Specifically, many retirement income sources feature some return of principal (contributions) combined with growth or earnings. This feature is not common during working years.
- And while we probably have only one income source while working, that’s often not the case in retirement. There are five common income sources for those who tithe in retirement. Let’s look at common retirement income sources that feature a return of principal and how this can cause confusion when you tithe in retirement:
1. Social Security.
During your working years, you pay payroll taxes into Social Security to receive an income stream in retirement. A benefits statement obtained from the Social Security Administration website lists how much you have paid into Social Security during your working years.
Now you have to decide whether to tithe (again) on the return of principal with each payment.
2. A pension.
If your employer’s pension plan pays you a retirement income stream, similar considerations to Social Security apply. In this case, you would need to see how much, if any, you contributed to your benefit.
3. Retirement accounts.
Here’s an example: Let’s assume a retiree owns an IRA valued at $1,000,000. ($250,000 of principal and $750,000 of growth)
Many years of working income contributed to the $250,000 of principal. Should that reitree tithe (again) on this principal amount when withdrawals are made?
4. Brokerage investment accounts.
The government taxes most dividends, interest, and capital
Published on 2 years ago