Many people spend decades faithfully giving to their church or favorite charity. Then all of a sudden, retirement arrives and raises the unexpected question: What income should I tithe on now?
Instead of one paycheck, you may receive income from Social Security, pensions, investments with unpredictable taxable income, rental properties with depreciation, and retirement account withdrawals. Some of that money has already been taxed. Some has already been tithed on. Some may never be taxed at all.
There are spiritual and biblical reasons why you might have to tithe certain amount. While I have opinions, I’m not really soapboxing those today. I’m simply sharing principles and considerations for those who already have the desire to tithe in retirement.
To put this challenge into story-form, let’s look at a hypothetical retiree named Mary.
Mary retired last year after a successful career. She wants to continue a habit she has maintained for decades, which is tithing 10% of her income. Simple enough, right?
Not quite.
During her working years, Mary received a paycheck every two weeks. Determining her tithe was straightforward. She simply gave 10% of her annual income. Now that she’s retired, her money comes from several different places:
- $40,000 Pension Income
- $30,000 Social Security
- $12,000 Rental Income
- $20,000 Traditional IRA withdrawals
- $10,000 Roth IRA withdrawals
That’s a grand total of $112,000 flowing into her household each year. But what exactly counts as income for tithing purposes?
As a financial advisor, I’ve learned that faithful and generous retirees often arrive at very different answers.
Let’s walk through the possibilities.
#1: The Easy Answer
One approach is to treat every dollar that comes into the household as income. Under this method, Mary’s calculation is simple:
$112,000 × 10% = $11,200 annual tithe
No complicated calculations.
No tracking contributions versus earnings.
No debates about whether one source of income is different from another.
Many retirees appreciate this approach because it is simple and easy to maintain.
But not everyone sees it that way.
#2: The “Already Tithed” Argument
Mary remembers that she spent decades contributing to retirement accounts.
Much of the money she is now withdrawing from her Roth IRAs and IRAs originated from wages during her working years.
She already tithed on much of that money before it ever went into an investment account.
So she wonders: “If I tithed on the money when I earned it, should I tithe again when I withdraw it?”
Roth contributions are made with after-tax dollars. Many retirees view Roth distributions as simply accessing money they already earned, already paid taxes on, and perhaps already tithed on. Unfortunately, separating contributions from growth after decades of investing can be difficult and, for some, practically impossible.
Under this perspective, Mary may decide to exclude her Roth IRA withdrawals from her tithe calculation.
That would reduce her tithing income from $112,000 to $102,000.
Her annual tithe is now:
$102,000 × 10% = $10,200
What About Rental Income?
Rental properties create another layer of complexity.
Mary receives $12,000 per year in rental income.
At first glance, that seems easy enough.
But should she tithe on the gross rent received or only on the profit?
Suppose she collects $12,000 in rent but spends:
- $2,000 on property taxes
- $1,000 on repairs
- $1,500 on insurance and maintenance
Her actual profit is only $7,500.
Some people tithe on the gross amount collected.
Others tithe only on the amount that actually benefits their household.
Reasonable people can disagree here.
#3: The Consistency Approach
After years of advising retirees, I’ve noticed that the people who seem most comfortable with their giving decisions aren’t necessarily the ones with the most precise calculations.
They’re the ones who establish a philosophy and apply it consistently.
For example, Mary could decide:
- Pension: Included
- Social Security: Included
- Net Rental profit: Included
- Traditional IRA withdrawals: Included
- Roth IRA withdrawals: Excluded
That would create a tithing income of:
$40,000 + $30,000 + $7,500 + $20,000 = $97,500
Annual tithe of $9,750
So now we have a dilemma.
One retiree could arrive at $9,750.
Another could find themselves at $8,500.
Another retiree could come to $11,200.
And each may be acting in completely good faith.
That’s what makes this question so challenging… and so personal.
~~~
Now, before we get to my take on the topic, I want to touch on something important.
While retirees often spend a lot of time debating what to tithe on, they sometimes overlook a much bigger issue and that is how to give tax-efficiently.
Suppose Mary wants to donate $10,000 this year. That money doesn’t have to “originate” from each of her income sources. She can choose the most tax-efficient source for that gift.
One option is to withdraw an extra $10,000 from her Traditional IRA, deposit it into her checking account, and write a check to her church.
The problem?
That IRA withdrawal is generally taxable.
Instead, if Mary is over age 70½, she may be able to make a Qualified Charitable Distribution (QCD) directly from her IRA to the charity.
The money goes directly from the IRA custodian to the charity and is excluded from her taxable income.
The church receives the same gift.
Mary may save hundreds or even thousands of dollars in taxes.
It’s one of the most powerful charitable planning tools available to retirees.
Another approach could be donating appreciated securities, bunching charitable gifts into certain years, or utilizing a donor-advised fund.
I have blogs on those topics here:
What’s My Take?
Whenever this topic comes up, people naturally focus on finding the “correct” answer.
I honestly don’t think there is one.
The financial planning challenge isn’t determining God’s accounting method.
The challenge is deciding what philosophy aligns with your beliefs, applying it consistently, and continuing to support the causes you care about.
The fact that you’re wrestling with giving faithfully in retirement is probably more important than whether your final calculation lands at $9,750 or $11,200.
At the end of the day, retirement only changes where your money comes from.
It doesn’t have to change your generosity!
