RETIREMENT PLANS
Ready for retirement? Give your IRA or 401(K) to charity.
You may find that your retirement plan can be an excellent additional "pocket" from which to make all or a portion of your charitable gifts each year.
Making gifts today
If you are over the age of 59½, and can make withdrawals from your IRA or other retirement plan without triggering an "early withdrawal" penalty, you may wish to make withdrawals from retirement plans to fund all or a portion of your charitable gifts.
Give from mandatory withdrawals
If you are at the point in life, normally age 70½ and older, when you are required to take mandatory taxable withdrawals from your retirement account, consider the possibility of charitable gifts as an integral part of planning for those withdrawals. You may find that by using all or a portion of your IRA distributions to make charitable gifts, you may be able to completely eliminate tax on the amount donated.
Example: John, age 74, enjoys making charitable gifts each year. He is also required to take a mandatory withdrawal from his IRA this year even though he does not need the additional income. The withdrawal amount will be added to his other taxable income and push him into a higher tax bracket. The increase in his accumulated gross income will also result in higher taxes on his Social Security benefits. Additionally, John does not have sufficient deductions to itemize his charitable gifts. He decides to contact his IRA administrator and request that a portion of the withdrawal amount instead be used to make gifts directly to charities he names. By making his gifts in this way, John does not report the withdrawal amount on his tax return, his tax bracket is not affected, additional tax is not incurred on his Social Security income, and the amount of his gift is not taxed, thereby reducing his income taxes.
You should seek assistance from your accountant or other advisor when determining the optimum amount to give from retirement plan accounts under federal and state tax laws.
For more information or to give from your retirement funds, contact the Foundation for the Diocese of El Paso at 872-8412. Ask to speak with the Catholic Legacy Fund staff representative to set up an appointment.
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