“THE FOUNDATION OF A GOOD RETIREMENT IS PLANNING”
– Earl Nightingale
Do you remember the Economic Recovery Act of 1981? If so, you probably deserve kudos for building your nest egg based on pre-tax savings. Unfortunately, those investment earnings aren’t tax-free forever, and the IRS requires that you start taking distributions from a standard IRA or 401K distributions at age 70 ½.
If you have the good fortune to NOT need funds from your IRA for day-to-day living expenses, the IRS allows you to make charitable contributions from your IRA of the yearly required minimum distribution (or more.) Your generosity to your favorite nonprofits will result in reduced income from your IRA distribution, which can be an advantage in calculating Medicare premiums and reducing your tax rate on your social security income.
As with everything in life, the rules are complex and you should check with your tax advisor to determine whether taking a tax deduction on your charitable contributions, avoiding capital gains with a gift of appreciated stock, or using your IRA distribution is best for you in any given year. In light of 2017 tax law changes, more of us will take the standard deduction, making income reduction an attractive benefit when you generously support causes you care for passionately.
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