Retirees can do good, get reliable income

By Sandra Block

Kiplinger’s Personal Finance

If you like the idea of guaranteed income in retirement and are charitably inclined, you maywant to give charitable gift annuities a look.

Acharitable gift annuity is a contract between you and a charity, often your alma mater’s foundation. You can donate cash, securities or other assets to the charity and get a charitable tax deduction upfront.

The institution invests the money and returns some of it to you— and up to one beneficiary— in fixed monthly payments for the rest of your life.

Effective this year, retireeswhoare 70

½ or older have the option of making a one-time donation of up to $50,000 from their traditional IRAs to a charitable gift annuity. In that case, the contribution isn’t tax-deductible, but the distribution will be tax-free. Once you reach the age at which you’re required to takeminimumdistributions fromyour IRA— 73 this year, increasing to 75 in 2033— the contribution counts toward that required minimum distribution, whichwould otherwise be taxed as ordinary income.

Any funds remaining after you die will go to the charity. That aspect of charitable gift annuitiesmakes them more palatable to retirees than traditional annuities, says Bryan Clontz, president and founder of Charitable Solutions LLC, a charitable-giving consulting firm. If you die early, your remaining funds will benefit a cause you’re passionate about, he says.

Because a portion of your investment will go to the charity, the payout froma charitable gift annuity will be lower than one froman immediate annuity, Clontz says. Most charities use a payout rate calculated by the American Council on Gift Annuities, which is reset periodically based on rates for the 10-yearTreasury note.

According to theUniversity ofCalifornia-Los Angeles’s Gift Planning calculator, which uses theACGApayout rate, an investment of $100,000 in a charitable gift annuity for a 65-year-old malewould generate an annual payout of $5,400, or $450 a month (you can run your owncalculations at https://legacy.ucla. edu/?pageID=50).

By comparison, the same investment in an immediate annuitywould provide $7,284 a year, or $607 a month, according to ImmediateAnnuities.com.

Because a charitable gift annuity is a long-term contract, you’llwant to check out the finances of the charity before you invest your money. That information is usually available on the charity’swebsite.

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