4 Smart Ways Retirees Can Give More to Charity, From a Financial Adviser

For retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the taxman?

By John Aarhus, Investment Adviser Representative (IAR)

published 5 December 2025

in Features

An older couple look happy as they work on paperwork on a laptop at their dining room table.

Many people choose to make philanthropy a priority in retirement, using their resources to bless others and fund a charitable legacy.

Years of hard work and saving provide them with an opportunity to give back in a meaningful way.

But here's the challenge: Without a proactive tax plan, retirees often pay far more to the IRS than they have to, which can limit the amount that reaches the causes they care about most.

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Being more intentional about the timing and structure of your charitable contributions can allow you to minimize your tax liability and maximize the impact of your gifts.

Here are four practical strategies that can help make your giving more tax-efficient.

1. Turn your RMD into a tax-free gift

Once you turn 73, you must make required minimum distributions (RMDs) every year from your tax-deferred accounts. These withdrawals are taxed as ordinary income, and they can easily nudge you into a higher tax bracket.

That could trigger a tax on up to 85% of your Social Security benefits and potentially raise the cost of your Medicare premiums.

For those who are charitably inclined, a qualified charitable donation (QCD) can be one of the simplest solutions. If you're 70½ or older, QCDs allow you to make tax-free donations directly from your IRA to a qualified charity.

The donation can satisfy all or a portion of your RMD and isn't reported as taxable income on your tax return. Your charity receives the full distribution, and the IRS gets nothing.

You can make a QCD from any tax-deferred IRA account, such as a traditional IRA, inherited IRA, or a SIMPLE IRA or SEP IRA that you're no longer contributing to. (You cannot use a 401(k) or similar workplace plan.)

In 2025, you can donate up to $108,000, and if you're married, each spouse can donate up to his or her individual annual limit. Just be sure the QCD goes directly from your custodian to the charity. The IRS says the funds can't touch your bank account.

2. Give appreciated stock, not cash

If you own stocks, mutual funds or exchange-traded funds (ETFs) that you've held for more than a year, you may find it makes sense to donate those investments directly to your church or a charity instead of selling them and giving cash.

Here's why: When you sell securities that have appreciated in value over time, the gains are subject to capital gains taxes. Depending on where you live, you also could owe state taxes on the gain.

But if you donate those investments directly to a qualified charity, you won't pay capital gains tax. Instead, you'll get a tax deduction for the full fair market value of the securities at the time of the transfer (if you itemize).

The tax deduction limit is up to 30% of your adjusted gross income, but you can carry over any excess for up to five years.

Meanwhile, the charity can sell the positions and pay zero taxes on the capital gains. If your church or nonprofit doesn't have a brokerage account, many custodians or local community foundations can help facilitate the transfer.

3. Name a charity as a beneficiary of your IRA or 401(k)

If you have more money saved in your 401(k) or traditional IRA than you expect to spend in retirement, you may be planning to designate your child or another loved one as the account's beneficiary when you pass.

But for many people, leaving the account to a favorite charity, or charities, can be a more tax-efficient option.

That's because when a qualified charitable organization receives a distribution from a traditional IRA, it doesn't have to pay income tax on the funds. This is a notable advantage compared to a child or other non-spousal beneficiary, who would have to pay ordinary income tax each year on any withdrawals from the account.

In most cases, family members are now required to take distributions from pretax accounts within 10 years, which could push your beneficiary into a higher tax bracket (especially if they're in their peak earning years).

In other words, leaving $200,000 to a specific charity through a traditional IRA would provide the charity with $200,000 to use.

But if that $200,000 IRA were to go to a non-spousal beneficiary, the taxes owed would likely eat up a good-sized chunk of that generous gift.

Your loved ones would probably be happier to receive a tax-free life insurance payout, a Roth IRA or another tax-smart option.

4. Make a difference with a donor-advised fund

Donor-advised funds (DAFs) have gained popularity since the Tax Cuts and Jobs Act (TCJA) changed the rules for writing off charitable contributions starting in 2018.

With a DAF, you can bundle or "bunch" several years' worth of donations into one large contribution (in cash or assets) to meet the TCJA threshold for itemizing charitable deductions in that year.

Instead of going directly to a charity in one lump sum, your donation is then invested by the DAF's sponsoring organization. And once it's invested, the donation can continue to grow tax-free until it is paid out, also tax-free, to qualifying causes over time.

Though you'll no longer have a legal right to the money in the DAF, you will have "advisory" privileges, which means you can help plan when and to whom you wish to make grants.

A DAF is relatively easy and inexpensive to set up — and it's a tax-smart way to follow through on your gifting goals.

Faithful giving, wise stewardship

I don't know many people who would say that getting a tax deduction is their top motivation for charitable giving. For most folks, it's more about their value system or part of their faith journey.

Still, tax efficiency can be an important consideration for many donors. The right strategy can help you be a better steward and allow you to give cheerfully, knowing you're making the maximum impact with your money.

An experienced financial adviser can walk you through the pros and cons — and the sometimes complex IRS rules — for these and other gifting options. Don't hesitate to ask for help so you can find the best fit for your family's giving goals.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Harlow Wealth Management, Inc. ("Harlow") makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision.

Harlow Wealth Management, Inc. ("Harlow") is an investment advisory firm registered with the Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the adviser or investment adviser representative has attained a particular level of skill or ability. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Form ADV Part 2A can be obtained by visiting adviserinfo.sec.gov and searching for our firm name. ADV Form 2B is available upon request. Harlow Wealth Management, Inc. does not offer tax or legal advice. Please consult your tax or legal advisor regarding your situation.

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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As a financial adviser with Harlow Wealth Management, John Aarhus is passionate about helping clients align their financial decisions with their values. His expertise spans retirement planning, tax-saving strategies and estate planning, with a focus on guiding people who are nearing, transitioning into or already in retirement. He believes that wise financial planning allows people to focus less on money worries and more on living with purpose.