Tips for Charitable Giving in Retirement

Throughout your life in retirement, there will be many opportunities to give back and donate to organizations that matter most to you and your family. There’s no better feeling in the world than knowing you’re doing your part to improve the lives of those less fortunate than you. But, being charitable doesn’t always have to be a one-way street. Giving retirement plan dollars to a charity can be a highly tax-efficient use of your savings. If you’re fortunate enough to be able to help your favorite causes, just make sure your charitable giving strategy is accounted for in your overall plan for retirement.

First, you will want to stress-test your portfolio’s longevity before making financial gifts to charity. It’s important to make sure your nest egg is secure and has the ability to last throughout a very long retirement before deciding how much to give to charity. If there’s a possibility of falling short, a better option would be to defer charitable lifetime gifts and instead, weave charitable giving into your estate plan.

Next, you should check-up on the charity’s effectiveness. Even though it’s a great feeling to make a financial contribution to a charity you have a personal or emotional connection with, be sure to know what percentage of their revenues go to actual programming and how much goes to administrative and fundraising expenses. “Charity Navigator” is a creditable source that rates charities on their efficiency, and downgrades charities that are not spending at least two thirds of their budgets on actual programming.

Then, it’s important that you understand the rules about deductibility. Gifts to most public charities will be tax-deductible. However, contributions to certain organizations like political groups and foreign charities may not be. If you’re contributing a very high amount of your adjusted gross income to charity, the deductibility of your contributions may be limited. The limits depend on the type of charity you’re contributing to. Most contributions to public charities are fully deductible as long as your contribution doesn’t exceed 50% of your adjusted gross income.

Finally, you may want to consider using RMDs for charitable contributions, or consider naming a charity as an IRA beneficiary if you want charitable giving to be a part of your estate plan. In any case, it’s important to work closely with your trusted financial professional so you don’t put your own retirement at risk. CLICK HERE to request your complimentary, no obligation review!