In recent years, ACC Senior Services has seen an increase in donations coming directly from donors’ individual retirement accounts (IRAs). Most recently, we processed many of these donations for ACC’s Big Day of Giving, which raised $360,466 (read story). Some of these gifts were been quite sizable. Why has this become a popular way of giving?
Many retirement accounts such as an IRA require you to take an annual required minimum distribution (RMD) once you reach a certain age. For many seniors this age is 70½, 72, or even 73 depending on your birth year. The RMD is determined by the value of your IRA, your age, and life expectancy. Your RMD amounts will vary from year to year based on these same factors changing as you age.
Your RMD is taxable, but you can avoid paying income taxes on part or all of this retirement distribution by making a qualified charitable distribution (QCD). A QCD is a direct transfer of funds from your IRA custodian to a qualified charity like ACC Senior Services. The money never touches your personal bank account. Any amount up to $100,000 can be excluded from your taxable income. The IRS allows your QCD to satisfy all or part the amount of your required minimum distribution from your IRA.
Of course, there are certain rules you need to follow. You should refer to the Internal Revenue Code and consult your financial advisor. The most important rule is that the funds must be transferred directly from your IRA custodian (like Schwab and Fidelity) to the qualified charity (like ACC). You can request that a check be mailed to the charity or to you, so you can forward it to the charity.
Donors often tell us they have sufficient retirement income and that they want to “donate their RMD” or a portion of it to ACC. We are happy for their financial security and grateful for their gift. Technically speaking, they are making a QCD to ACC which satisfies their RMD for that year. It’s an alphabet soup! At ACC, we just call it an “RMD donation.”
On Wednesday July 19, 2023, at 3 pm, Mark J. Pratt will visit ACC again and give his popular workshop on Required Minimum Distributions. He will discuss the latest IRS rules and practical considerations for people who want to make a qualified charitable distribution to their favorite charity. Register at accsv.org/classes.
Mark is the owner of Pratt Financial & Insurance Services, serving clients for over 25 years. He has been a guest speaker at ACC many times over the past decade.
For more information about giving to ACC Senior Services, contact Ted Fong, Development Officer, at tfong@accsv.org or 916-503-5392.
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