Charitable giving in retirement

If there’s a cause you’re passionate about, retirement doesn’t have to mean the end of your generosity. Charitable donations undoubtedly benefit the recipient but increasingly, research shows they’re good for the giver, too. Supporting a cause you believe in can boost personal happiness and may even reduce stress and inflammation, which improves overall health.¹ And of course, it generates tax benefits.  

With advantages like these, it’s no wonder people want to keep giving to charity throughout their lives — from retirement and beyond, even including charitable giving in their legacy plans. 

So, how can you make charitable giving part of your long-term plan? Consider these ways to plan for a retirement where you can support the charities you value and experience all the good that comes from it.  

Share your charitable goals with a professional 

Your financial professional stays updated on the strategies for optimal retirement — and they know you. Share your thoughts about giving in retirement and work with them to define and refine your retirement strategy. Together, you can optimize things like your gift and tax strategies, taking advantage of shifting laws and regulations. In 2021, for example, the CARES Act was enhanced to provide incentives for greater charitable giving.² 

Secure steady sources of income 

Simply put, one way to keep giving is to keep earning. Consider talking with your financial professional about annuities, among other options. Annuities are a way to help replace a paycheck in retirement. Generally, you pay into a plan over time and once the annuity threshold is met, the plan begins to pay you back. These payments become guaranteed³ income during your retirement years³ — income you can share with charities you support. 

Additionally, a diversified portfolio that earns robust interest over your lifetime can also provide funds to donate in your later years. 

Add a charitable benefit rider to your life insurance 

When people think of life insurance beneficiaries, they tend to think of family and other loved ones. A charitable benefit rider, however, expands this thinking to include a charity of your choice. 

With a charitable benefit rider, you can select a charity to receive funding from your policy when you purchase life insurance. And on some term life products, there are unique riders that donate an extra 1% of the death benefit (up to $100,000) — over and above the amount paid to the designated beneficiaries — to any qualified 501(c)(3) charity of the policy owner’s choosing.⁴ While the donation is not gifted until you pass away, it’s a great way to add charitable giving to your legacy. Some potential advantages of the built-in benefit rider for charity include: 

• There is no additional premium cost to your life insurance premium (subject to state availability). The charitable rider is already built-in when you purchase the policy. 

• The built-in charitable benefit doesn’t take away from payouts to beneficiaries. You can donate without reducing the amount your family receives. 

• You can update the charity to which you’d like to donate at any time. The benefit is flexible to your preferences.

Create a trust fund with donations in mind 

If you have assets or capital you want to donate but don’t know how, a financial professional can help you set up a trust fund and create an income tax strategy that best benefits the charity you choose  — and works well for you, too. 

One type to consider is a charitable remainder trust (CRT). A CRT is an irrevocable trust commonly known as a “split-interest trust” because it has both charitable and non-charitable beneficiaries. It provides you with a stream of income (the “income interest”) for a certain term of years or for your lifetime and allows the balance of that asset to eventually go to your favorite charity (the “remainder interest”). With many benefits, a CRT allows you to use highly appreciated assets to satisfy your income needs and your charitable intent without any adverse tax consequences.  

Another option to consider is a wealth replacement trust (WRT). Using excess cash flow or other sources of funds, a WRT purchases a life insurance policy insuring either you, your spouse, or both, depending on how the trust is structured. Upon your death or the death of your spouse, the insurance proceeds are designed to be paid to the trust and “replace” the assets that went to charity. A WRT provides many benefits, mainly that it allows you to make a significant charitable contribution without sacrificing a generous legacy to your family.   

Remember that time is a resource 

In addition to (or instead of) your money, remember that you can always give your time. In retirement, people often have more free time, and you can use it to deepen your relationship with a cherished cause by volunteering, seeking a seat on the board, or sharing the expertise you’ve honed through your career. Volunteering in retirement can help give you a sense of purpose and has been shown to increase longevity and reduce the risk of Alzheimer’s disease.⁵ You can even get started before retirement, building relationships and learning about opportunities for further involvement when you have more time to give. 

With the right retirement strategy and a commitment to the cause, you can remain involved throughout your life — and even beyond. In the process, you’ll enrich your life, too.