Your life after work begins with maintaining your standard of living. Fulfillment and financial happiness are not about the replacement of income but rather matching the standard of living you were accustomed to having before leaving the workforce.
Standard of living can be thought of as the things you do regularly that bring joy to your life, like travel, sporting events, golfing, or volunteering at your favorite charity. This article will focus on the challenges of charitable gifting after you begin your life after work. Charitable givers have been conditioned to give generously of their resources. Resources being time, energy, and money. The challenge for many organizations and the givers themselves is that “money” has been thought to be income. Many churches strongly encourage a giving of 10% of your income to be used toward charitable endeavors.
The obvious elephant in the room would be that our income tends to drop substantially at retirement time by design. You are no longer saving for retirement, no longer paying into Social Security, and you likely didn’t spend everything you made, or retirement really wouldn’t be a viable option. Now your income has contracted, and 10% is less than it was in the past – significantly less.
This change in the ability to contribute is not an issue for some families but a serious emotional strain for others. If contributing to charitable causes was a significant focus of your life during work then your life after work can feel less than purposeful with that part of your life reduced or gone altogether. Giving was, in fact, a part of your standard of living.
The best way to address the issue is to prepare before you leave the workforce for both household spending and your giving practices. Remember, a successful “your life after work” is not about replacing your income but your standard of living.
You can use Donor Advised Funds to make gifts that are deductible today at a higher tax rate in theory than when you retire and then use those gifts to fund future donations. Should you consider charitable giving as part of your standard of living or at least something you wish to continue during retirement, this is a great strategy to consider.
If you are over the age of 70.5 and have tax-deferred IRA money, then you can consider the use of QCD’s or Qualified Charitable Contributions. We have written articles on the past, and you can get more information at www.thebettergiver.com. QCD’s are an excellent strategy that can help reduce taxation on Social Security, Medicare part B premiums as well as allow you to maximize the benefits of the standard tax deduction.
During the years where you have left the workforce but have yet to turn 70.5, make certain you are strategic in your charitable giving. Pay attention to the itemized and standard deduction tax limits and consider multiple contributions every other year to increase the potential for tax deductibility.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.
