If you are at or near retirement, you may find your lifestyle is fine as-is and you don’t need additional money from your IRA. However, even if you don’t need (or want) to withdraw money, the IRS requires you to take IRA withdrawals once you reach the age of 72. These withdrawals are called RMD’s (Required Minimum Distributions).
And there’s a problem with RMDs when you are already have income. RMD’s are subject to ordinary income taxes and more taxable income can push you into a higher tax bracket, which affects your Social Security income and Medicare benefits.
Thankfully, there’s a great option for you. You can do a QCD! A QCD is a Qualified Charitable Distribution. It’s easy. You simply tell your IRA administrator (your stockbroker or bank or whoever handles your IRA account) to direct your IRA distributions to the East Shore Endowment Fund!
Because the IRA distribution goes directly to charity, you do not report it as taxable income and do not owe any taxes on it! You avoid taxes, and the Endowment is funded; it’s truly a win-win option!
To be fair, you could direct your QCD (your qualified charitable deduction, remember?) to any qualified, 501c3 Charitable Organization. But really, the Endowment Fund is helping ensure that East Shore survives, and thrives well into this crazy future, and what’s better than that?
You may even find that the QCD gift option offers greater tax savings than making cash donations, because using this technique reduces your Adjusted Gross Income (AGI) on your tax return, and that has a “ripple effect.” Your AGI is used to calculate the taxable portion of your Social Security benefits AND it affects deductions and credits you qualify for.
Finally, there’s one more excellent reason for you to direct your next IRA distribution to the East Shore Endowment fund: Your assets are not treated the same when passed to your heirs. IRA assets are not tax-advantaged in your estate, in fact your heirs pay income taxes on the IRA assets at their own income tax rate!
That’s why qualified charities are an ideal option for your IRA distribution. The Endowment fund doesn’t pay income taxes when we receive these assets, which means every penny of your donation can be directed to support East Shore.
For more information, contact your financial advisor, see a member of the East Shore Endowment committee, or East Shore’s administrator.
Please note: a recent change made in the recent CARES Act, suspended the minimum required distribution for this year (2020). Read more here.
by Craig Nelsen, chair ESUC Endowment Committee