At KZCF, we regularly work with legal, financial and tax advisors like you to help clients reach their charitable goals.

We know that you are well aware of the tremendous benefits to clients and charities when a client names a charity, such as a fund at KZCF, as the beneficiary of an IRA or other qualified retirement plan. So, what does this mean for the future? How can you help a client plan ahead to maximize a bequest of retirement fund assets and support increased giving during the client’s lifetime? A great way to do this is by encouraging clients to maximize their IRA contributions. Reasons to do this include:

  1. Taxable income “suppression” in the year of the contribution.
  2. Tax-deferred growth until distribution (now only required at age 73 of the account owner).
  3. Ease of changing a beneficiary designation to name the client’s fund at KZCF, which will remove the assets from the client’s taxable estate at death and avoid income tax.
  4. Nearly erasing the unrealized capital gains for recipients by leaning into highly-appreciated stock and other property at increased values to make bequests to family or others.

We recommend ensuring your charitable clients do not overlook an important tool in retirement savings maximization (and ultimately charitable giving) known as the “catch-up” contribution. This is the “extra” money that retirement savers aged 50 or older can store in their retirement accounts.

Advisors and clients might consider this a bonus opportunity rather than a catch-up, especially if a client has been maximizing their retirement savings all along. The catch-up contribution allowance also helps clients compensate for years when retirement contributions fell short due to earnings or savings interruptions. These interruptions can include layoffs, caregiving, high-expense years or similar circumstances.

Thanks to the SECURE Act, catch-up contributions have created even more buzz about opportunities for retirement savings, especially as the rules are set to shift in 2024 and 2025. In any event, the effects can be impactful. For example, an extra $1,000 deposited annually from ages 50 through 65, earning 6% on average, could deliver an extra $27,000 in retirement income by age 65.

From a charitable giving perspective, the greater the IRA balance, the more opportunity it provides for a client to give later to a fund at KZCF. What’s more, higher IRA balances can motivate your clients to deploy a Qualified Charitable Distribution (QCD) strategy, with its many benefits:

  1. Beginning at age 70.5, your client can make QCDs of up to $100,000 in 2023 ($200,000 for married couples) and indexed for inflation beginning in 2024.
  2. QCD assets can be distributed to a Designated Fund or Field-of-Interest Fund at KZCF. These assets can also go to another qualifying public charity.
  3. QCDs can count toward required minimum distributions for clients required to take them.

All in all, IRAs are the most prolific retirement savings vehicle in the United States, accounting for nearly 33% of the $33 trillion in total retirement assets as of December 2022. Regardless of the retirement savings vehicle, contribution maximization is a winning strategy for wealth building, family gifting and charitable giving.