3 reasons to consider a charitable gift annuity as part of your retirement strategy
Whether you plan to retire now or down the road, smart planning can get you there
September 30, 2015 | by Jeremy Arkin
You've worked hard...for decades and it's about time for you to enter the next phase in your life, one in which you'll have time to catch-up on all those books you've been meaning to read, travel to those capitals (foreign and domestic) that you've always wanted to see, and perhaps volunteer for that charity you've always admired. It's called "retirement" and you've earned it.
But retirement is something you have to plan for, particularly the financial part. How can you be assured that you will continue receiving the income you need and be free from the worry that you "won't have enough”?
There are many answers to that question, and we strongly recommend that you seek the guidance of a professional financial advisor to help you explore your options. One of those options - one that will also help you establish a legacy at a nonprofit organization that's meaningful to you (like Duke!) - is called a "charitable gift annuity."
Let’s walk through the three reasons a charitable gift annuity can be a great retirement planning tool.
1. Receive a fixed income for life
A charitable gift annuity is a contract whereby in exchange for a gift to your favorite charity, the charity agrees to pay you (and a loved one, such as a spouse) a fixed income for the rest of your life. You would also receive an income tax deduction for a portion of your gift. After you have passed away, the organization would use the remainder of your gift as you have directed.
The fixed income can be paid to you annually, semi-annually, quarterly, or monthly - it's up to you. Often, your payment can be deposited directly into your bank account.
2. Deduction now – payment later
With a "deferred" or "flexible" gift annuity, you can make a gift now (and recognize an immediate income tax deduction), but have your payments begin in the future. If you haven't quite retired and are still drawing a salary, recognizing your income tax deduction now may be particularly valuable because it could offset some of the taxes you would otherwise pay this year. Scheduling your payments to begin in a later year may be tax-efficient because you may be in a lower tax bracket or living in a state with a lower (or no) state income tax.
3. Make a difference in the lives of others
Perhaps the most exciting thing about a charitable gift annuity is the positive impact it can have on a cause you care about. Most charities will allow you to designate how your support will eventually be used. For example, many alumni who have established a gift annuity at Duke have directed that their gift ultimately be used to provide need-based scholarships. What a legacy!
If you are interested in exploring how to establish a charitable gift annuity at Duke, please visit our website, or better yet – contact us! We can provide a personalized illustration of the payout rate and income tax deduction available to you. We can also help you to explore similar vehicles, including one that would provide a variable income to you -- a payment stream that would change each year based on how your initial gift is invested (spoiler alert: it's called a charitable remainder unitrust).