Charitable Moves You can Make with Your IRA
The IRA has long been viewed by the investment community as one of the best vehicles for saving for your own retirement, hence the name, Individual Retirement Account (IRA). What most people don’t know is that you can make charitable donations directly from your IRA and that it may reduce your overall tax burden. It’s complicated and it is not for everyone so if this post piques your curiosity, I encourage you to read on and do a little homework before you start filling out a distribution form.
For those folks who are highly charitably inclined, of retirement age but likely still working and earning a large income, this strategy may be for you. Normally, you may begin making distributions from an IRA at age 59 and the government requires everyone at age 70.5 to make required minimum distributions from their IRA’s. Quite simply, the government let you put this money away tax-deferred earlier in life, so they want to tax it at some point. While you cannot take a deduction by donating your distribution, you can lower your adjusted gross income (AGI) by up to $100,000 by distributing your distribution directly to a qualified charity. Be careful, if you take the distribution yourself, then give the money to charity then this strategy is null and void. Minimizing your AGI can help lower your marginal tax bracket, avoid the additional 3.8% surtax on net investment income and the 0.9% healthcare surtax on earnings. All these add up to a potentially a win-win for a charitably inclined investor looking to make a difference.
This strategy certainly isn’t for everyone but when applied correctly, it can make sense for some charitably inclined people over 59 years old who have a current year high income and have large IRA accounts. This strategy can only be used with an IRA account, 401K’s are not eligible. Also, it is important to understand that whatever money you take out of your IRA now, won’t be there for you in the future so plan wisely. As always, we are not CPA’s at RHS Financial so we suggest you consult a tax professional before attempting this or any other tax planning strategy.
Disclosures: This post is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RHS Financial, LLC unless a client service agreement is in place. Please contact us at your earliest convenience with any questions regarding the content of this post. For actual results that are compared to an index, all material facts relevant to the comparison are disclosed herein and reflect the deduction of advisory fees, brokerage and other commissions and any other expenses paid by RHS Financial, LLC’s clients. An index is a hypothetical portfolio of securities representing a particular market or a segment of it used as indicator of the change in the securities market. Indexes are unmanaged, do not incur fees and expenses and cannot be invested in directly.
2024 Disclosures
RHS Financial is an SEC registered Investment Advisory Firm and distributes this presentation for informational purposes only. This presentation ( hitherto referred to as the presentation throughout this disclosure), blog post, infographic, slide deck or whatever form of informational modality the reader wishes to describe this as is provided for informational purposes only and should not be construed as investment advice in any way.
We believe the information, including that obtained from outside sources, to be correct, but we cannot and do not guarantee its accuracy in any way. RHS Financial uses information from outside sources to develop graphs, charts, infographics, etc. to enhance this presentation and while we believe the information from these outside sources, to be correct, we cannot and do not guarantee its accuracy in any way,
Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors who may be employees of but do not necessarily reflect the views of RHS Financial as a company. There can be no guarantee that developments will play out as forecasted. The information in this presentation is subject to change at any time without notice. This presentation contains “forward-looking statements" concerning activities, events or developments that RHS Financial expects or believes may occur in the future. These statements reflect assumptions and analyses made by RHS’s analysts and advisors based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Because these forward-looking statements may be subject to risks and uncertainties beyond RHS Financials’ control, they are no guarantees of any future performance. Actual results or developments may differ materially, and readers are cautioned not to place undue reliance on the forward-looking statements. In a nutshell; these are our best guesses and please don’t assume they are fact.
Mentions of specific securities, investment products, investment indices, companies or industries should not be considered a recommendation or solicitation. Data and analysis does not represent the actual or expected future performance of any investment or investment product Index information is used to illustrate general asset class exposure, and not intended to represent performance of any investment product or strategy.
This post may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is not affiliated with RHS Financial and does not sponsor, endorse or participate in the provision of any RHS’ services, or other financial products. Index information contained herein is derived from third parties and is proffered to you unaltered as we derived it from the third party.
RHS Financial, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where RHS Financial, LLC and its representatives are properly licensed or exempt from licensure. This presentation is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RHS Financial, LLC unless a client service agreement is in place.
If the client is deemed suitable and agrees, RHS may employ leveraged strategies for these clients. Leverage attained through margin on a client’s account can add additional risk. While RHS tends to seek to improve return with theses strategies by applying leverage to less risky indexes, there is no guarantee that that RHS will lower risk or improve returns.
RHS Financial. 4171 24th St. Suite 101 San Francisco, CA 94114
