I'm hoping to retire in the next few years, roughly age 55. I've been thinking about charitable giving… I do it every month and want to continue through retirement but then I started thinking about taxes and well, wanting to avoid those taxes which seem unfair.
For reference, the large portion of my retirement will be funded through my rollover IRA. If I want to draw money for health insurance and living expenses and another 10k for charitable giving, I will have to take out another 10k per year, which makes sense, but then this means I'll be paying another 2k in taxes AND if there are ACA subsidies, they will be reduced by 1.5k meaning I am effectively paying a 35% tax on charitable giving post-retirement which is really messed up.
Is there a way of doing this where I don't get fleeced for wanting to give?
Early retirement and charitable giving
byu/EricTheNerd2 infinancialindependence
Posted by EricTheNerd2
3 Comments
Many charities will accept stock donations. This is generally what I do. You get to write off the entire value of the stock at transfer, including any unrealized capital gains.
Setup a DAF (donor advised fund) NOW prior to FIRE with a lump sum contribution from taxable brokerage account or other appreciated assets. Then you can fund a decade or more of charitable giving from the DAF and it will have no impact on your income. In fact the funds inside the DAF can be invested so you can in theory turn a lump sum contribution into a lifetime of giving. You could doa “4% rule” for charitable giving. Since running out is less catastrophic and the fund could be replenished in the future we actually went with a “6% rule”. That should fund charitable giving for at least 20 years with good odds of it lasting a lot longer.
DAF also has the advantage in that you avoid the gains on any appreciated assets (i.e. stock shares or bitcoin) donated to the DAF and you get a lump sum tax deduction which is more valuable than a smaller one each year for multiple years (due to impact of itemized vs standard deduction).
I made a post when we setup ours and the FIRE specific benefits of a DAF
https://www.reddit.com/r/Fire/comments/1mwfswe/donor_advised_funds_daf_are_worth_considering_if/
Do you itemize to deduct the charitable giving? If 10k doesn’t make enough sense to itemize, what about doing multiple years now into a charitable account to make this year’s itemization make sense. I’ve not done this but I think this works.