Charitable Giving in Retirement: Establishing Your Philanthropic Legacy
In the year 2000, at the ripe old age of 45, Bill Gates and his wife at the time, Melinda French Gates, established the Bill and Melinda Gates Foundation, eventually transferring $20 billion in Microsoft stock to the charitable organization. A few years later, in 2006, Berkshire Hathaway chairman and legendary investor Warren Buffett pledged $36.1 billion in shares of the company to the Gates Foundation; at this point he has donated about $45 billion to the foundation, considering gifts in his own name and those he has made in the names of his wife and children.
While none of these “mega-benefactors” are fully retired (Gates, 67, has stepped away from most day-to-day operations at Microsoft, while Buffett, at age 92, is still involved as chairman of Berkshire Hathaway), their later-in-life commitment to philanthropic giving has helped to spawn a movement among some of the wealthiest people in the world. Buffett’s Giving Pledge, co-founded in 2010 with Gates, is designed to encourage wealthy persons to give away at least half of their fortunes in support of worthy causes. And even some younger entrepreneurs, such as Meta (Facebook) founder Mark Zuckerberg, have pledged to donate most of their fortunes to charitable causes.
While most of us may never amass the quantity of assets that will enable us to give on the level of Zuckerberg, Buffett, or Gates, many persons, as they approach the end of a successful career and begin to think about retirement, also begin to think about ways of giving charitably to their community and the world. In fact, for many, retirement is a time to maintain or even expand their philanthropic efforts. A 2018 study by the Women’s Philanthropy Institute at Indiana University found that for those who were already engaged in philanthropic efforts prior to retirement, the switch to retirement made no significant difference in their levels of charitable giving, even when they pared back spending in other areas.
Strategies for Philanthropy
One key to establishing or solidifying your philanthropic legacy in retirement is making your philanthropic goals a part of your overall financial and estate plan. High-net-worth individuals may find it advantageous, for example, to transfer highly appreciated assets to a donor-advised fund (DAF) in order to reduce the size of the taxable estate and also to avoid taxes on capital gains. The fund can then make gifts to causes chosen by the donor while managing the donated assets for additional growth (which can provide for future giving). Persons with more significant assets may wish to consider establishing a charitable foundation that can receive and manage assets and make gifts in accordance with the wishes of the donor. But even those whose estates may not make them candidates for either of the above strategies may want to consider making a gift to a qualified charity of the donor’s choice using retirement account assets (i.e. - IRA) by means of a qualified charitable distribution (QCD). For those age 70 ½ or greater who may need to limit income in a given tax year, a QCD can be a valuable way of “doing well by doing good.”
Choosing Wisely
Perhaps even more important than the method of giving is choosing where and how you want your philanthropic efforts directed. Bill and Melinda Gates, galvanized by horrifying statistics of childhood deaths in impoverished regions, spent several years consulting with experts, visiting countries where they wanted to have an impact, and doing other due diligence to determine exactly where and how they could have the greatest influence on improving health outcomes for children. Similarly, it’s important for retirees interested in establishing a philanthropic legacy to spend some time carefully considering what is most important to them about their giving intentions. Literacy, public health, arts and culture… the areas of opportunity are limited only by the donor’s values and priorities. In fact, having some detailed discussion about these matters with your Quantum advisor can both help clarify your objectives and suggest a strategy for your charitable initiatives that best supports your other important financial goals.
The Internal Revenue Service lists qualified charitable organizations according to tax-exempt status and filings. Organizations like GuideStar can provide background information on charitable entities, allowing prospective donors to analyze financial responsibility and mission effectiveness.
At Quantum Financial Advisors, we help our clients build a solid foundation for pursuing their philanthropic interests. Our fiduciary duty requires us to provide advice and guidance driven by placing our client’s needs, priorities, and goals foremost. To learn more, visit our website to read our article, “Your Best Retirement: Making It about What Matters Most to You.”
DISCLOSURE: Quantum Financial Advisors, LLC (“Quantum”) is an SEC registered investment adviser with its principal place of business in the State of California. Quantum may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. The article is for educational purposes only; and contains the opinions of the author, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy or deemed to provide investment recommendations, and it should not be relied on as such. Any subsequent, direct communication by Quantum with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
For information pertaining to the registration status of Quantum, please contact us or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov).
Investments involve risk and, unless otherwise stated, are not guaranteed. The Information was based on sources we deem to be reliable, but we make no representations as to its accuracy. Past performance is not indicative of future results. Readers of this information should consult their own financial advisor, lawyer, accountant, or other advisor before making any financial decision.
