Charitable Gift Annuities: Benefit Yourself and Your Favorite Charity

Donating to charitable gift annuities can provide you with tax breaks now and income later. Here’s what you need to know.

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If you like the idea of guaranteed income in retirement, you may want to give charitable gift annuities a look. A charitable gift annuity is a contract between you and a charity, often your alma mater’s foundation. You can donate cash, securities or other assets to the charity and get a charitable tax deduction up front. The institution invests the money and returns some of it to you — and up to one beneficiary — in fixed monthly payments for the rest of your life. 

Charitable gift annuities maximum contribution for 2023 

Effective this year, retirees who are 70½ or older have the option of making a one-time donation of up to $50,000 from their traditional IRAs to a charitable gift annuity. In that case, the contribution isn’t tax deductible, but the distribution will be tax-free. Once you reach the age at which you’re required to take minimum distributions from your IRA — 73 this year, increasing to 75 in 2033 — the contribution counts toward that required minimum distribution, which would otherwise be taxed as ordinary income. 

Any funds remaining after you die will go to the charity. That aspect of charitable gift annuities makes them more palatable to retirees than traditional annuities, says Bryan Clontz, president and founder of Charitable Solutions LLC, a charitable-giving consulting firm. If you die early, your remaining funds will benefit a cause you’re passionate about, he says. Because a portion of your investment will go to the charity, the payout from a charitable gift annuity will be lower than one from an immediate annuity, Clontz says. Most charities use a payout rate calculated by the American Council on Gift Annuities, which is reset periodically based on rates for the 10-year Treasury note. 

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Income from a charitable gift annuity 

According to the University of California–Los Angeles Gift Planning calculator, which uses the ACGA payout rate, an investment of $100,000 in a charitable gift annuity for a 65-year-old male would generate an annual payout of $5,400, or $450 a month. By comparison, the same investment in an immediate annuity would provide $7,284 a year, or $607 a month, according to

  • Because a charitable gift annuity is a long-term contract, you’ll want to check out the finances of the charity before you invest your money. 
  • That information is usually available on the charity’s website.
  • As with Social Security benefits, the longer you delay turning on the income stream, the larger the payout, he says. 
  • Some products add 0.25% or 0.35% to your payout rate for every year you wait to take income. 

An option with fewer bells and whistles than a fixed-index annuity is a fixed annuity. In this case, you give an insurance company a lump sum in exchange for a guaranteed interest rate for a set period. 

A multiyear guaranteed annuity is a type of fixed annuity that pays a guaranteed rate for three to 10 years. Some three-year versions of these annuities are paying a 6% rate, compared with a rate of 4.5% to 5% for the top-performing three-year certificates of deposit. Interest is tax-deferred until it is withdrawn. 

Are gift annuities a good idea? 

Don’t invest money that you think you’ll need soon in fixed-rate annuities. They typically come with surrender charges of up to 7% if you withdraw more than a specified amount before the end of the contract term. For some time now, financial planning experts have recommended annuities to retirees who are legitimately concerned that they’ll run out of money. 

But the products could also appeal to retirees with well-funded nest eggs, David Lau, founder and CEO of DPL Financial Partners says, because it allows them to invest their savings more aggressively than they otherwise would. If your annuity covers basic expenses, he says, you don’t have to worry about selling your stocks or stock funds in a down market to pay the bills. 

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.