By: Amanda M. Phillips
What are you looking forward to most in retirement? For some people, it’s the idea of endless road trips in their newly purchased RV, exploring all the crooks and crannies our country has to offer. For others, it’s the thought of relaxing in a hammock with nothing but lemonade and a stack of cozy mystery novels. Some look forward to perfecting their golf game; others just want to spend more time with their grandchildren.
There are no wrong answers when it comes to planning your dream retirement. But for many, what gives the most satisfaction is the ability to contribute more time and money to causes they care about. The ability to make a difference.
It may sound surprising, but many retirees find not working to be something of a shock. (Especially those who work busy, demanding, or fulfilling careers.) Suddenly, they find themselves without the purpose and meaning they once had, or the community they once spent the better part of their day with. As a result, many new retirees can often feel unfocused and unsatisfied. That’s why, at Hudock Capital, we don’t just help our clients be able to afford retirement. We help them plan for a smooth and meaningful transition into retirement – a transition that helps them replace the human interaction and purpose they got from work.
In my experience, one of the best ways to do that is to help you create a plan for increased community involvement and charitable giving. By doing this, we can make retirement even more rewarding than you had planned. Furthermore, with careful financial planning, we can also help you claim certain tax benefits through strategic philanthropy.
Here at Hudock Capital, we go through a specific, step-by-step process with each client who wants to explore the idea of charitable giving. By doing this, we can ensure that you:
• Donate in the most effective and efficient way for your overall retirement plan so that no dollar is wasted.
• Take advantage of all the tax benefits available to you.
• Will feel satisfied and fulfilled in retirement.
Here’s how the process works.
- 1. Take Inventory
The first step in the process is to figure out what exactly you have the work with. We’ll look at:
Your age – more elderly people may not have the physical ability to do much in person, whereas someone younger may want to spend a part of their week helping people with their hands rather than just their wallets.
Your assets — if you want to participate in charitable giving, how much can you afford to give without affecting your own lifestyle? What form does your wealth take, and is it easy to donate to others or do we need to transfer it into another form first?
Your time – are you looking to fill the hours similar to what you did when you are working? Would you prefer simply donating a bit of time each month? Obviously, your lifestyle will determine how much time you are able and willing to spend on philanthropy. - 2. Map Out Your Charitable Goals
Next, we determine what it is you need to make retirement more fulfilling. For example, do you prefer donating money, time, or both? What is going to fill the void for you? Some people need to actually be out there doing something. They need to be physically putting on a new roof for their church rather than just paying for it. Others see themselves as most effective when it’s their money that’s being put to good use. Again, there’s no wrong answer. - 3. Conduct Research to Determine Where You Can Do the Most Good
We also need to determine which specific cause, charity, or community that you want contribute to. For example, one client of ours who recently retired knew that she wanted to help pandas. Why pandas specifically? I don’t know — but she knew, and that was all that mattered.
Other people aren’t quite sure who or what they want to help, and that’s okay, too. Here at Hudock Capital, we frequently use our resources to help clients build connections with reputable and reliable organizations and charities. For instance, one client asked me, “Amanda, what is the best nonprofit out there for helping abused women?” Another asked, “who do I turn to for help in funding children’s literacy programs?” In both cases, I was able to draw on the vast resources of Hudock Capital to find who would be the best option for the clients wishes, situation, and assets.
Once we have all of that figured out, the next step is to… - 4. Determine what form your charitable giving should take.
Most retirees have several options, each with their own advantages.
Qualified Charitable Distributions. A QCD is a tax-free donation of money from your IRA to a qualified charity. You can begin making these donations once you reach age 70½.
QCDs can be especially effective once you start taking required minimum distributions, or RMDs, from your IRA. With a Qualified Charitable Distribution, you can gift a portion of your RMD to the charity of your choice, subject to certain conditions. This money will not be counted on your tax return. As a result, QCDs can help lower your tax bill each year. By using QCDs, you can also avoid dipping into your cash when donating so you can save it for regular expenses or doing fun things in retirement.
Gifting Stock. If you own stock in individual companies, you can also look at donating shares to the charity of your choice. For instance, say you own stock in the ACME Company. Over the last few years, ACME stock has skyrocketed in value – resulting in more gains than you expected or even need. Instead of selling some of those shares, you can gift them instead. The advantage here is that gifting stock can sometimes help you move down into a lower tax bracket. However, unlike QCDs, stock gifts must be itemized on your tax return for you to claim a tax deduction, so the process can be a bit more complicated.
Donor Advised Funds. This is one of my favorites. A DAF is great for those who want to give a greater amount over a longer period, or who want to give eventually but aren’t quite ready yet. With this option, we can move a portion of your portfolio into the DAF so that it’s set aside for charitable giving while continuing to grow. Every time you contribute, you can claim a tax deduction. Then, when you feel the time is right, you can gift all or part of the funds to charity. Some folks use DAFs to spread the gift out to many different nonprofits over time. They can also be a terrific way to cement your legacy and ensure that good is still being done in your name even after you’re gone. - 5. Work with Your Tax Preparer
Finally, we will work closely with your tax preparer to figure out how much to gift to benefit your own tax situation. We will ensure that everything is coordinated so that your taxes will be planned out well in advance with no nasty surprises.
By doing all this, you will be able to add more meaning, fulfillment, and even joy to your retirement. You will know that you have not just done well for yourself — you are doing good for your community. Many of our clients feel their retirement years are actually the most productive years of their life. Those who participate in charitable giving often find it will make new friends, learn new skills, and participate in activities they never have before. And all the while, they are also strengthening their own financial situation!
Here at Hudock Capital, giving back to our community is largely why we do what we do. Every employee is encouraged to donate a part of their time and income to causes that matter most to us. And every quarter, our company donates X percent of our revenue to various local nonprofits. You will often find us on weekends volunteering at a local shelter, assisting first responders, sponsoring a fundraiser, or even just coaching youth sports. Doing these things has enriched our lives immeasurably. Helping our clients do the same has made their retirement more than they ever thought it could be – even for the ones who thought the best thing about not working would be spending more time on the beach.
So, if you would ever like help in making your own retirement more fulfilling…
If you would like to contribute more to causes that matter to you…
If you would like to explore ways to strengthen both your community and your finances…
We would love the chance to work with you! At Hudock Capital, our core purpose is to make a positive and profound difference in the lives of our clients and in the communities we serve. Please reach out if we can ever be of assistance.