How to keep on giving during retirement

Planning for the philanthropist in you

Don't stop giving just because you're retired

As you're planning for retirement, there are all sorts of things to take into account when developing your plan for the lifestyle you want to live. Among the many considerations, you may have a favorite charity – or charities – you take pride in donating money to on a regular basis. You enjoy helping causes that are near and dear to your heart and may want to continue this pattern of giving throughout your retirement.

Be clear about your priorities

When thinking about sustaining such philanthropic endeavors, it's important to thoughtfully consider your options prior to committing to another, albeit altruistic, expense. Before you make any financial commitments to charity, you must first take a look at your financial picture and determine how it fits within your overall priorities and whether or not this is affordable within your long-term plan.

If you find yourself faced with the possibility of financially coming up short, it may make more sense to scale back or eliminate your monetary donations. You could derive similar satisfaction from getting out and contributing your time and energy to help your community without negatively impacting your financial situation. In fact, once you retire you may have more time available to dedicate to favorite causes than you had when you were working full time.

Take time to do it right

On the other hand, if you are in a position to make a financial contribution to charity, here are some things to consider:

  • If you can estimate the amount you're comfortable donating and determine the frequency of your giving, you could work with your advisor to make this an ongoing part of your spending plan.
  • Decide who you want to donate your money to and be sure to do your research. Whether it's an organization you have established ties with or a new cause, you'll want to make sure their vision aligns with your intentions. CharityNavigator, an independent charity evaluator, provides free financial evaluations of America's charities and useful details about their efficiencies and the potential usage of your contribution.
  • Talk with your advisor and/or tax professional about the potential tax benefit of donating, whether it's time or money. If you're looking to maximize the benefit of charitable giving, it's important to familiarize yourself with the rules around deductibility and specific paperwork you'll need to document any claims.

Manage large gifts carefully

Morningstar.com provides "10 Tips for Charitable Giving During Retirement," including two possible ideas for you to consider if you are looking to make significantly large charitable gifts:

  1. Use required minimum distributions from your IRA. If you don't need these distributions when you're required to take them, you can contribute up to $100,000 directly into your charity of choice. You also have the option to name a charity as an IRA beneficiary, just as you would your spouse or child. In either situation, be sure to consult a professional about the potential tax implications.
  2. Consider establishing a trust or participating in donor-advised funds. Donor–advised funds allow you to undertake a more formal giving program, whereas a trust might work well for significantly larger charitable gifts. In either case, it is even more critical to seek the advice of an expert.

Consult with your financial advisor and keep them informed

Make sure your advisor understands that charitable giving is important to you and an important part of the lifestyle you want in retirement. Since opportunities to contribute to charity arise when you least expect it, like Hurricane Katrina, be sure to keep your financial advisor informed of the unplanned, as well as your planned, giving.

The information contained herein is being provided to you for educational purposes only and is not intended to constitute investment, tax or legal advice nor a recommendation or solicitation to invest in any investment product. The general information contained in this publication should not be acted upon without obtaining specific investment, legal and/or tax advice from a licensed professional.

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