Giving in retirement – have a plan

Life experience makes us more aware of the world around us – the causes that mean the most to us and the ways charitable giving can make a difference. That sense of purpose doesn’t go away when we retire.

In fact, it might grow stronger.

While other types of spending typically decrease in retirement, charitable giving generally remains the same, according to a recent study by the Women’s Philanthropy Institute. A financial plan for living in retirement likely isn’t complete without a plan for giving in retirement.

Writing a check is a simple way to give – but it may not be the most strategic. When it comes to maximizing your gift, you’ll want to choose an approach that makes sense for you as well as your chosen charity.

Here are six strategies for giving in your retirement years:

Cashing out – It’s always possible to sell securities in your retirement accounts – an IRA, 401(k) or 403(b) – and donate the proceeds to charity. But you’ll need to pay the income tax associated with the distribution.

Qualified charitable distributions – Once you reach the age where required minimum distributions (RMDs) come into play, you could reduce your tax liability by donating pretax dollars from your qualified retirement accounts.

• Eligibility: You must be 70 1/2 or older at the time of the distribution. Simplified employee pension plans and SIMPLE IRAs are generally excluded.
• Annual limit: An RMD taken as a qualified charitable distribution cannot exceed $100,000 in a single tax year, even if your RMD amount exceeds $100,000.
• Qualifying organizations: The IRA trustee or custodian must make the distribution directly to a qualifying charity. Private foundations and donor advised funds are not eligible. You cannot take the distribution yourself, then write a check to the charity.

Donating an RMD – Another option is to take the RMD and potentially offset the tax by making a charitable donation, if eligible.

Appreciated assets – You can support charities without dipping into your cash reserves by donating appreciated assets, such as stocks, real estate or privately-held business interests that you’ve had for at least one year. When gifting these types of assets to a public charity or donor advised fund, you can eliminate capital gains taxes (keep in mind that when it comes to private foundations, privately-held business interests or other illiquid asset gifts are only deductible at the cost basis value). This allows the potential for more money to be available to go to charity than had you sold the asset first and gifted cash.

• If gifted to a public charity or donor advised fund, up to 30% of your adjusted gross income can be declared.
• If gifted to a private foundation, the deduction limit is 20% of adjusted gross income (with a tax being paid on the gain for any illiquid assets or privately-held business interests).

Depreciated assets – If you’re looking to gift assets that have lost value, selling them first could be more advantageous. You could claim a capital loss on your tax return, use the cash as a charitable donation and receive an additional deduction for the gift. The combined tax savings could total more than the current value of the assets – and still represent a meaningful gift.

Planning ahead – Giving before you retire could offer greater tax benefits because you are gifting at a time when a deduction is potentially more impactful. A Donor Advised Fund allows you to make a large contribution now that has the potential to serve as a source for charitable giving for years to come.

As we think about our legacies, we tend to focus on what we will give to others when we are gone. Charitable giving in retirement, however, creates a real-time legacy. It allows us to see the good work we make possible.

Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.