Giving in Your Golden Years
If you are in your golden years, you may be wondering how you can give more to the causes that matter most to you, while making sure that you have enough financial stability to last you through retirement.
Fortunately, in addition to standard charitable donations, there are a number of ways to use your money to make a difference that won’t unduly impact your savings.
Take Advantage of Qualified Charitable Contributions
If you are in your 70’s, you may be able to give more while paying less in taxes than you currently are.
Do you have a tax-deferred retirement account, such as a work 401k plan or a traditional IRA? Once you turn 73, you are legally obligated to take out an annual “required minimum distribution,” or RMD. These withdrawals will be taxed as regular income.1
If you write a check to your favorite non-profit from your checking or savings account, you will be donating money that has already been taxed. But if you donate the same amount directly from your retirement account through what is called a “qualified charitable distribution,” or QCD, then you can subtract it from the amount you have to take out in RMDs. Your taxable income will be lowered, and therefore reduce the amount you owe in taxes.2
This strategy can be especially useful if you benefit more from taking a standard deduction on your taxes than from taking itemized deductions.3 That's because if you make the donation from your retirement account through a QCD, you can still take the standard deduction and use the QCD to reduce what you pay on taxes even further.
To take advantage of QCDs, you must remember to report your qualified charitable distribution on your tax return. If you have a financial advisor, they will be able to help you calculate your RMDs and make your QCDs with minimal effort.
Invest for Impact
Impact investments are investments that are made with the explicit intention of achieving a specific positive outcome in the world. For example, you could consider investing through a micro loan program that supports women in developing countries to achieve financial independence by starting their own businesses.
Other impact investments support causes closer to home such as building affordable housing in low income neighborhoods in the US.
Impact investments generally offer lower returns than conventional bonds, but still provide the investor regular income, while accessing crucial funding for projects that might not qualify for other types of financing. Calvert Impact Capital, for example, allows you to invest as little as $20 in their Community Impact Note, which offers returns between 3% to 4.5% and funds renewable energy projects, housing, and other impact initiatives in the US and abroad.4
Join a Giving Circle
If you want to amplify the impact of your donations, consider joining or starting a giving circle with your friends or community.
Giving circles work by bringing people together to pool their donations and make a greater difference than they could have on their own. Some giving circles ask members to commit to donating a fixed amount on a regular basis, such as monthly, quarterly, or annually. Others fund specific initiatives or outcomes, such as raising enough money to build a new youth center, fund a college scholarship for a high school student, or save the life of a homeless pet at a local animal shelter. However big or small the goal is, giving circles are a fantastic way to help organizations achieve specific outcomes.5
Leave a Legacy Gift
If you want to keep having a positive impact in your community even after you are gone, consider leaving a legacy gift. For example, you could name a local charity in your will as the recipient of a certain percentage of your estate. This is one way to make sure you have the money you need to cover any unexpected expenses for the rest of your life while still making sure that part of your wealth will go to support the causes you care about in the future.6
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. Please consult a legal, tax or financial professional for information specific to your individual situation. None of the information provided is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon for transacting securities or other investments. Under no circumstances shall LongView be liable for any direct, indirect, special, or consequential damages that result from the use of, or the inability to use, the materials provided. In no event shall LongView Asset Management, LLC have any liability to you for damages, losses, and causes of action for accessing this commentary. Past performance is not indicative of future results. This content not reviewed by FINRA.
Photo by Mark Timberlake on Unsplash.
[1] https://www.wellsfargo.com/goals-retirement/planning-distributions/
[2] https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-100000-in-tax-free-gifts-to-charity
[3]https://www.youtube.com/watch?v=Q3amqWf_G-Y&t=686s
[4] https://calvertimpact.org/investing/community-investment-note
[5] https://www.grapevine.org/what-is-a-giving-circle
[6]https://nonprofits.freewill.com/resources/blog/legacy-giving#:~:text=What%20is%20legacy%20giving?,given%20during%20the%20donor's%20lifetime).