Consider an IRA Charitable Rollover and How Women Can Narrow the Retirement Saving Gap
by Rita Wilczek on Jul 31, 2019
Thought you might find these articles of interest. Being tax-wise helps make your funds last longer.
Thanks,
Rita
Consider an IRA Charitable Rollover
If you want a tax break and want to help a nonprofit, this may be a good move.
Provided by Rita Wilczek
Have you ever wanted to make a major charitable gift? Would you like a significant federal tax break in acknowledgment of that gift? If so, an IRA charitable rollover might be a good option.
If you are age 70½ or older and have one or more traditional IRAs, you may want to explore the potential of this tax provision. In the language of federal tax law, it is called a Qualified Charitable Distribution (QCD) – a direct transfer of up to $100,000 in IRA assets to a qualified charity.1
An IRA charitable rollover may help you lower your adjusted gross income (AGI). That may be a goal in your tax strategy, especially if your AGI is large enough to position you for increased Medicare premiums, greater taxation of your Social Security benefits, or exposure to the 3.8% investment income tax and the Medicare surtax.
Up to $100,000 may be excluded from your gross income during the year in which you make the gift. The gifted amount also counts toward your Required Minimum Distribution (RMD).1,2
By the way, this $100,000 annual QCD limit is per individual taxpayer. If you are married, you and your spouse may gift up to $200,000 in a year through IRA charitable rollovers. Imagine lowering your household’s AGI by as much as $200,000 in a tax year.2
The Internal Revenue Service will not let you claim the amount of a QCD as a deduction on Schedule A. (That would amount to a double tax break.)1
You need not be rich to do this. When many people first learn about the IRA charitable rollover, they think it is only for multimillionaires. That is a misconception. Even if you do not think of yourself as wealthy, a QCD could prove a significant element in your tax strategy.
How does it work? Logistically speaking, an IRA charitable rollover has to unfold in a certain way. The custodian or trustee overseeing your IRA must either make the gift to the charity for you or give you a check made payable to the charity for the amount of the gift.2
Do not simply take a distribution from your IRA and then write a check to the charity. That does not qualify as a QCD. If you make this mistake, the money you have taken out of your IRA will simply be included in your gross income for the year, and you may not even be able to claim a charitable contribution deduction for your efforts.2,3
An IRA owner must be age 70½ or older to do this; the gifted assets must come from an IRA, or multiple IRAs, and are subject to RMD rules. (SEPs and SIMPLE IRAs are ineligible if an employer contribution has been made for the particular year.)1,2
The charity or nonprofit involved must pass muster with the I.R.S. It must be a public charity eligible for charitable contribution deductions; that is, it must qualify as 501(c)(3) eligible. It cannot be a donor-advised fund or a private foundation. The charity should provide you with a letter of acknowledgement of your gift, for federal tax purposes. If that letter is not quickly sent to you, be firm in requesting it. It should state that you have received no gift, reward, or benefit from the charity in exchange for your contribution.2,3
If you pledge a donation to a qualified charity or nonprofit, an IRA charitable rollover can be used to satisfy your pledge.2
This tax break has been a boon to charities and IRA owners alike. Correctly performed, a charitable IRA rollover may help to lessen tax issues while benefiting qualified nonprofit organizations.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - investopedia.com/taxes/can-i-use-money-my-ira-donate-charity/ [11/21/18]
2 - forbes.com/sites/bobcarlson/2018/04/13/why-retirees-should-make-charitable-contributions-from-their-iras [4/13/18]
3 - forbes.com/sites/frankarmstrong/2018/10/19/tax-magic-for-seniors-the-qcd [10/19/18]
How Women Can Narrow the Retirement Saving Gap
Steps toward saving more & revitalizing your retirement strategy.
Provided by Rita Wilczek
When it comes to retirement saving, many women lag behind many men. Historically, that has been the case. A recent study by Student Loan Hero offers more evidence of the problem –While 29% of men polled in the study indicated that they have no retirement savings strategy, an alarming 48% of women also answered that they have no retirement savings.1
On top of everything else, there is also the income disparity for women in the United States, where women are earning 37% less per year than men. With all these factors, it’s easy to understand both why women find challenges in retirement saving and why these challenges might seem, at first, insurmountable. It could create a frustration that might cause one to avoid learning what needs to be done to begin saving for retirement. Education and talking with a financial professional, however, have the potential to give even the most frustrated retirement saver a boost.1,2
How can women plan to address this? Here are a few positive steps you can take.
Find out where you stand in terms of savings now. A simple retirement planning calculator (there are many available online) can help you see how much more you need to save, per year and over the course of your career. Retirement planning calculators are for informational purposes only and should not be considered a substitute for a more comprehensive retirement evaluation. A financial professional can help.
Save enough to get the match. If your employer will match a percentage of your retirement plan contributions per paycheck, strive to contribute enough to your plan each paycheck, to ensure that the match occurs.
Ask about automatic escalation. Some workplace retirement plans have this option, through which you can boost your retirement contributions by 1% a year. This is a nice “autopilot” way to promote larger retirement nest eggs.
Ask for a raise. A higher salary means more money to put toward your savings effort.
Make tax efficiency one of your goals. Consult a financial professional about this, for there are potential advantages to having your money in taxable, tax-deferred, and tax-exempt accounts. For example, when you contribute to a retirement plan, you make tax-deferred contributions. This lowers your taxable income today; the distributions from those accounts will be taxable in retirement.4
Some of these suggestions you will do on your own, but it may also be a good thing to speak to a financial professional you trust and create a savings strategy that will be of particular help for you and your needs.
Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - fool.com/investing/2018/12/19/its-harder-for-women-to-save-for-retirement-heres.aspx [12/19/18]
2 - bizjournals.com/bizwomen/news/latest-news/2018/12/more-than-half-of-women-worry-about-financial.html [12/17/18]