Roth 403(b) vs. Housing Eligible Traditional 403(b) for Clergy

A 403(b) account can be an effective retirement tool. There are two types of 403(b) accounts. The Roth 403(b) allows you to contribute to your 403(b) account on an after-tax basis and pay no taxes on qualifying distributions when the money is withdrawn. A traditional 403(b) receives an immediate tax savings by reducing your income that is subject to current taxes. Also, for clergy, distributions from a traditional 403(b) plan that are designated as housing eligible may have the benefit of being tax free in retirement. Clergy can use this calculator to see the impact of making contributions to a Roth 403(b) or a Traditional 403(b) with housing eligible distributions at retirement.

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Roth 403(b) vs. Housing Eligible Traditional 403(b) for Clergy Definitions

Current age: Your current age.
Age at retirement: Age you wish to retire. This calculator assumes that the year you retire, you do not make any contributions to your 403(b). For example, if you retire at age 65, your last contribution occurs when you are actually 64.
Annual traditional contribution: The amount you will contribute to a 403(b) each year. This calculator assumes that you make 12 equal contributions throughout the year at the beginning of each month. **403B_ANNUAL_LIMITS** Both the annual maximum and 'catch-up' provisions are indexed for inflation.
Annual Roth contribution: Your Roth 403(b) contribution is calculated so that your total cost, after taxes, equals your traditional 403(b) contribution. For example, assume you have $10,000 in traditional 403(b) contributions and an income tax rate of 10%. Your tax savings for the traditional 403(b) contribution would be $1,000 in income taxes plus $1413 in SECA taxes. An equivalent Roth 403(b) contribution would then be $7587, which does not receive any current year tax breaks.
Maximize contributions: Check this box to increase all contributions to the maximum allowed each year. This will include future years that qualify for catch-up contributions. **403B_ANNUAL_LIMITS**
Expected rate of return: The annual rate of return for your 403(b) account. This calculator assumes that your return is compounded annually and your deposits are made monthly. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31^st 2020, had an annual compounded rate of return of 13.8%, including reinvestment of dividends. From January 1, 1971 to December 31^st 2020, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.8% (source: www.spglobal.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that investment funds and/or investment companies may charge.
Combined state and federal taxes: The current marginal state plus federal income tax rate you expect to pay. **TAXTABLE_CURRENT_DEFINITION**
Traditional SECA tax savings: Ministers and clergy do not pay Social Security of Medicare taxes (SECA) on contributions to a traditional 403(b) plan like a regular employee pays FICA tax. This results in a significant tax savings for traditional 403(b) contributions. Roth 403(b) contributions do not reduce SECA taxes. For **PLAN_YEAR**, incomes over **FICA_MAX** that have already had the maximum SECA tax paid, could result in a smaller tax benefit when calculating a 403(b) contribution. If your income is expected to exceed this limit, we recommend speaking to a financial professional.