Waiting to Retire to Give to Charity? 3 Reasons to Do It Now

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For many people, charitable giving feels like something to focus on later in life, after retirement, when there's more time to reflect and plan.

But from a financial standpoint, the most powerful time to give is often while you're still earning.

That may sound counterintuitive. After all, retirement is when you finally have clarity about what you can afford to give away.

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But the truth is, charitable gifts made during your peak earning years can have a bigger financial impact — both for you and for the organizations you support.

1. Tax advantages today, generosity in the future

Here's an example to better illustrate: Deductions are most valuable when your income, and therefore your tax bracket, is at its highest. A $10,000 donation can feel very different depending on when it's made.

If you're in the 35% tax bracket, that gift could save you $3,500 in taxes. Make the same contribution after you've retired and dropped into a 22% bracket, and the tax savings fall to $2,200.

The charitable impact is the same, but the benefit to you is nearly 60% greater during your earning years.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

That doesn't mean you have to give away a large sum all at once. One of the best tools for bridging today's tax advantages with tomorrow's generosity is a donor-advised fund (DAF).

These funds allow you to make a sizable, tax-deductible contribution in a high-income year, but decide later how and when to distribute the money to the charities you care about.

It's like setting aside cash in your "charitable account." You lock in the deduction now, but retain the flexibility to give gradually, even long after you've retired.

This approach can be especially useful if you're expecting a one-time jump in income, such as selling a business, receiving a bonus or exercising stock options.

You can offset some of that taxable income by funding a donor-advised account in the same year.

2. High interest rates can work in your favor

Today's higher interest rate environment has also made certain charitable strategies more appealing than they've been in years. Vehicles like charitable remainder trusts or charitable gift annuities can provide reliable income streams for you or your loved ones while ultimately benefiting the causes you support.

With rates up, those income streams are often higher, a welcome development for anyone seeking both generosity and financial security.

3. You'll make an impact now

The bigger picture here is that giving shouldn't be an afterthought or something reserved for the end of your career.

It can be a living, active part of your financial plan, and a way to align your wealth with your values while you're still building both.

The key is understanding what you need to support your lifestyle and what constitutes excess net worth that could be put to work for others.

When giving is integrated into your broader plan, it not only helps you make the most of your resources but also adds purpose to your financial life.

You don't have to wait for retirement to make an impact. You can start now. Often, that's when your generosity goes the farthest.

Apollon Wealth Management, LLC and Apollon Financial, LLC ("Apollon") provide advice and make recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing price to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment advice. Please contact your financial advisor with questions about your specific needs and circumstances.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Robert Gorman is a founding partner and Chief Operating Officer at Apollon Wealth Management, a collaborative and transparent financial planning firm focused on aligning clients’ goals of growing and preserving their hard-earned wealth. As one of the highest-decorated advisors in the field (ranking in the top 1%-2% in the nation by certification), Robert has taken the helm of building Apollon’s unique trading platform. A respected Principal/Wealth Management Advisor, Robert established his career at the Gorman Financial Group/Northwestern Mutual in 2004. Under his direction, the firm was voted “Best Financial Planner” by The Post and Courier and was a finalist for “Best Investment Firm” in 2016 and 2017.