Being a charitable retiree

There is nothing that brings a smile to your face quite like helping another, but doing so may become more difficult during retirement. Your portfolio may not be robust enough to allow for consistent donations, or you may be concerned that giving consistently will significantly reduce your ability to support yourself later in life. Even still, this does not mean you must sacrifice giving all together. Consider some of these charitable alternative donation strategies to maximize your retirement savings while still giving back to your community.

Option 1: Gifting appreciated securities

There are a number of benefits to gifting appreciating securities. Gifting these securities will allow you to avoid capital gains taxes on the securities’ appreciation. Additionally, the fair market value of the security is deductible as a donation come tax time.

Option 2: Donate your RMD

If you don’t need your required minimum distribution for income, you can donate up to $100,000 of an RMD to charity. While RMD contributions are not tax deductible, you do not owe taxes on the amount of the RMD donated to charity.

Option 3: Name a charity as an IRA beneficiary 

You can name a charity as a sole beneficiary of your IRA, which the charity will then receive tax-free. Doing so will also make your estate eligible for a charitable deduction. You can additionally consider splitting your IRA into two accounts if you would still like to name one of them to your heirs.

Option 4: Contribute to donor-advised funds

You can contribute income or appreciated securities to donor-advised funds, run by organizations such as Fidelity or Vanguard. These contributions are tax-deductible when first donated to the fund, and if you choose to donate securities, you do not have to pay capital gains taxes on the contribution. Once you have contributed to the fund, you can make recommend charities as possible recipients of grants; however, the grants ultimately come from the financial institution.

Option 5: A charitable trust

This option makes the most sense if you are considering much larger charitable donations. There are two main types of charitable trusts: a charitable remainder trust and a charitable lead trust. With a charitable remainder trust, you will earn income on the trust for a specified number of years, at the end of which all assets revert to the charity. With a charitable lead trust, the charity earns the income from the trust while the assets eventually revert to the donor or their beneficiaries.

Option 6: Donate your time

Volunteering with an organization can be even more fulfilling than simply donating money, and at the end of the day, this may be a wonderful use of your time during retirement.