Double the Impact: Turn Your Retirement Funds Into Meaningful Giving

Double the Impact: Turn Your Retirement Funds Into Meaningful Giving

In most walks of life, you’d probably be pleased if you could accomplish two goals with one action. That’s exactly what happens when you turn some of your retirement funds into a charitable gift for an organization you love. Here's how that works.

Eventually, you’ll likely need to draw on your IRA to help fund your retirement. But if you don’t need all the money, consider this: Donate some to charity and get a tax break.

If you haven’t already withdrawn from your traditional IRA, you must do so or face penalties once you reach 73, or 75 if you were born in 1960 or later. These withdrawals — called required minimum distributions, or RMDs — are taxable and could push you into a higher tax bracket, possibly causing you to pay more taxes on your Social Security benefits and Medicare premiums.

However, by having your RMDs go directly to a qualified charity, you can avoid increasing your income while benefiting a charity whose work you support.

This strategy works best with a traditional IRA — if you have a Roth IRA, you’re not required to take withdrawals.

If you have a traditional 401(k), you’re required to take RMDs, but you can’t move this money directly to a charity. You could, however, roll it over to an IRA and then make the transfer.

Consult with your tax advisor before making any of these moves, which could be valuable in your retirement years.