Top Strategies for Giving While Living: Retirees Guide

When Christine retired at the age of 65, she found herself with more free time and a passion to contribute to her community, yet she was concerned about her financial security. Many retirees share similar sentiments. By employing thoughtful strategies for giving while living, individuals like Christine can make a meaningful impact while maintaining their financial well-being.

Understanding Giving While Living

What does it truly mean to embrace the philosophy of giving while living?

In 2016, Warren Buffett, a globally renowned investor, encouraged people to consider giving their wealth away during their lifetime, rather than posthumously.

In essence, it's about experiencing the joy of watching one's contributions shape a better world and create lasting legacies while ensuring one’s needs are met.

Retirees now have the time and financial means to make significant differences across sectors, such as healthcare, education, and community development, while still safeguarding their own financial security.

Embracing this approach can inspire others and demonstrate that impactful generosity is achievable and rewarding.

Financial Planning for Retirees

To effectively embrace strategies for giving while living, retirees must first ensure their own financial stability. This involves meticulous planning, a keen understanding of their assets, and a comprehensive projection of future financial needs.

They should establish a budget that accounts for potential long-term care costs.

Additionally, setting aside an emergency fund is crucial to cover unexpected expenses.

Retirees can consult with a fiduciary financial planner that specializes in wealth management.

These professionals can provide valuable insights into optimizing portfolios and leveraging tax-efficient giving strategies.

Through careful planning and professional guidance, retirees can confidently support their loved ones and cherished causes, all while maintaining their financial independence.

Ultimately, this balanced approach enables them to experience the profound gratification of giving, knowing their future is secure.

Assessing Your Savings and Expenses

It begins with a thorough assessment of savings, a cornerstone of responsible financial management. Retirees must take stock of their financial resources, evaluating accounts and other investment vehicles to determine how much they have available.

By projecting the costs of a long retirement, including health care and potential long-term care, retirees can build a "safety buffer." This buffer is crucial to ensure that any financial support to others does not compromise their own well-being. With this insight, the identification of available funds for giving becomes clear, providing confidence in the resilience of their future financial plans.

Evaluating Long-Term Care Needs

Considering long-term care needs—proactively—can significantly extend the peace of mind adults experience while pursuing altruistic endeavors.

Approximately 70% of adults over 65 will need some form of long-term care.

Investing in long-term care insurance, weighing the costs of potential services, and assessing personal health conditions are critical. Such evaluations bring clarity, ensuring one’s plans sustain both their future and generosity.

Thorough preparation lays the groundwork for meaningful contributions—cultivating a purposeful and financially secure retirement while leaving a lasting legacy of giving.

Balancing Giving with Personal Financial Security

Retirees with significant savings can harmonize generosity with financial security by adopting a balanced approach.

First and foremost, it's vital to conduct a thorough financial assessment, delineating anticipated expenses including long-term care, lifestyle choices, and unforeseen emergencies. This strategy can identify funds safely available for giving without jeopardizing personal financial security.

Commitment to maintaining a comprehensive personal budget ensures thoughtful and informed decisions. By targeting specific amounts for family support and charitable endeavors, retirees can maximize their impact while safeguarding their financial foundation.

Additionally, by leveraging tax-advantageous giving mechanisms, such as donor-advised funds and strategic gifting, retirees can enhance their contributions. This ensures they not only support their chosen beneficiaries more effectively but also perpetuate their financial stability, fostering a legacy of generosity and balanced prudence.

Tax Benefits of Charitable Giving

When retirees explore charitable giving, they can unlock substantial tax benefits that complement their philanthropic and financial goals.

Intriguingly, the IRS offers deductions on a variety of charitable contributions, including donations of cash, goods, and even appreciated assets. By incorporating these strategies into their financial plans, retirees can reduce their taxable income, potentially lowering their overall tax burden and preserving more wealth for future giving.

Moreover, retirees can utilize donor-advised funds to time their donations strategically. By contributing to these funds, they achieve immediate tax benefits while retaining the flexibility to distribute the funds to charities over time.

Lastly, for those with significant savings, the strategic use of charitable remainder trusts can provide a reliable income stream while also benefiting chosen charities. These sophisticated tools allow retirees to enjoy lifetime income while maximizing the impact of their philanthropic endeavors upon their passing, harmonizing personal benefits with charitable intentions.

Making Direct Financial Gifts to Family

Retirees possess a unique advantage, a window of opportunity, where they can tangibly improve their loved ones' lives through direct financial gifts. By gifting within annual exclusion limits, they can reduce their taxable estate while easing their family's immediate financial burdens, providing both emotional and financial security without compromising their own long-term care plans.

Structuring Gifts to Minimize Tax Impact

Balancing generosity with financial prudence requires thoughtful planning to minimize the tax impact of substantial gifts.

In 2024, individuals can gift up to $18,000 per person each year without incurring gift tax, courtesy of the annual exclusion. Married couples can jointly give $36,000 per recipient annually.

To further mitigate taxes, retirees might utilize their lifetime gift tax exemption, which in 2024 stands at $13.61 million per individual. Strategic use of this exemption can significantly reduce taxable estates.

Moreover, employing donor-advised funds enables retirees to bunch their charitable contributions, maximizing itemized deductions in high-income years. This strategy balances immediate philanthropic benefits with tax efficiencies.

Incorporating these methods ensures that retirees can support their loved ones and favored causes without jeopardizing their financial stability.

Setting Up Trusts for Loved Ones

By establishing trusts, retirees can provide ongoing financial support to their children and grandchildren while maintaining control over their assets. Trusts offer protection against extravagant spending, ensuring the longevity of the funds.

Trusts also enable significant tax advantages.

These financial instruments can be tailored to specific needs or circumstances, such as covering educational expenses or medical costs. Flexibility, customization, and the peace of mind offered make trusts a compelling strategy for giving while living.

Trusts also provide the added benefit of shielding assets from potential creditors of the beneficiaries. In doing so, retirees can ensure their wealth is preserved and used as intended, striking a balance between generosity and financial prudence. By considering a “living trust,” retirees can also simplify the asset transfer process and avoid probate delays, ensuring a seamless legacy for their loved ones.

Charitable Giving Options

Exploring charitable giving options enables retirees to contribute meaningfully to causes they care about while alive, seeing firsthand the positive impacts of their support. Donor-advised funds, private foundations, and direct donations are some pathways to consider.

Each strategy offers unique benefits and opportunities for retirees to make a lasting difference in their communities and beyond.

Donor-Advised Funds

A donor-advised fund (DAF) offers retirees a flexible way to give while living, maintaining control over charitable contributions.

1. Open a DAF account with a sponsoring organization.
2. Contribute assets - cash, stocks, or other appreciated assets.
3. Invest the funds for potential growth.
4. Recommend grants to favorite charities over time.

DAFs provide immediate tax deductions and eliminate the complexity of managing a private foundation.

Additionally, retirees can enjoy seeing the impact of their philanthropy during their lifetime.

Charitable Remainder Trusts

Charitable Remainder Trusts (CRTs) offer retirees a powerful strategy for giving while living, combining philanthropy with financial planning.

1. Establish a CRT with legal and financial advisors.
2. Transfer appreciated assets into the trust.
3. Receive regular income from the trust, often for life.
4. Designate remaining assets to chosen charities after death.

CRTs provide income streams while allowing significant charitable contributions.

They also offer tax advantages, making them a prudent choice for retirees with specific philanthropic goals.

Volunteering Your Time and Expertise

One of the most profound ways for retirees to give back is by volunteering their time and expertise.

This strategy requires no financial outlay.

Instead, retirees can leverage their professional backgrounds and life experiences (management, healthcare, education).

Mentorship programs are ideal venues for sharing knowledge and guiding younger generations.

Retirees can also assist non-profit organizations by offering consulting services, ensuring efficient and optimal outcomes for various projects.

Ultimately, the act of giving one’s time serves as a testament to the retiree’s legacy. Connections made and lives transformed are invaluable rewards.

Creating a Giving Plan

Creating a giving plan requires a blend of introspection, analysis, and strategic foresight. Retirees should start with assessing their current financial situation, including assets, liabilities, and potential future expenses such as long-term care costs.

By incorporating the assistance of a financial advisor, they can craft a "giving budget". This enables them to strike a balance between their philanthropic desires and their personal financial security. A well-thought-out plan ensures that retirees' contributions to their loved ones and chosen charities are impactful, while still preserving enough to maintain their quality of life in the later years.

Reviewing and Adjusting Your Plan Regularly

Continuously adapting one's giving strategy is essential to maintaining financial security and maximizing impact.

• Reassess Financial Health: Evaluate assets, liabilities, and potential long-term care costs regularly.
• Monitor Changes: Stay updated on any changes in tax laws that could affect giving strategies.
• Engage with Beneficiaries: Periodic discussions with family and charities ensure alignment with their current needs.
• Consult Advisors: Regularly meet with your financial advisors to adjust the plan based on market conditions and personal circumstances.

Regular reviews allow for timely adjustments, ensuring the plan remains viable and effective.

Adapting strategies as needed secures both personal financial health and philanthropic goals.

Conclusion

Giving while living offers retirees a unique opportunity to make a lasting impact on the lives of their loved ones and their community. By understanding the benefits and employing strategic giving methods, retirees can enjoy the satisfaction of seeing their generosity in action while maintaining their financial security. Whether through direct financial gifts, charitable trusts, or donor-advised funds, there are numerous ways to give meaningfully and effectively. With careful planning and consideration, retirees can create a legacy of generosity that will be remembered for generations to come.

Tom Geoghegan, CFP®, CIMA®, CPWA®, RMA® is the Founder of Beacon Hill Private Wealth and also a member of the National Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), and is featured on the Fee-Only Network. 

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