With this in mind, UD offers the following list of basic points to consider:
- Determine how you’d like to spend your retirement years.
- Try to get a good sense of what your desired lifestyle will cost.
- Save as much as you reasonably can and invest appropriately.
- Maximize the financial resources you can draw upon in retirement.
Determine how you’d like to spend your retirement years.
Although many people travel, devote more attention to family and friends, increase their volunteer involvement, or concentrate on hobbies and leisure activities, you should feel free to settle on your own mix of passions and pastimes. Just remember that retirement can have several phases as you age, so allow for both the development of new interests, as well as the possible need to accommodate eventual changes in health and mobility.
Try to get a good sense of what your desired lifestyle will cost.
In large measure, this will be a function not only of what you want to do, but also where you live – both the part of the country (or the world) in which you choose to settle and the nature of the four walls you’ll be calling home. Recognize too that you won’t necessarily live in the same place throughout retirement. Moreover, continue to budget for things that are elements of your life currently such as personal and health care expenses (Medicare won’t cover all of them!), food, clothing, transportation, emergencies, and our seemingly constant companion: inflation.
Save as much as you reasonably can and invest appropriately.
True, particularly if you have in mind a modest lifestyle in retirement, it’s possible to “over-save.” Yet people often underestimate – sometimes significantly – what their desired lifestyle will cost. Others may be quite realistic about what they will need but have difficulty putting enough aside over the years or fail to manage responsibly whatever wealth they have been able to amass. Whatever your situation, building your nest egg should be a high priority.
To the extent possible, maximize the financial resources you can draw upon in retirement.
A number of options exist, among them:
Regardless of the combination of options you assemble and draw upon, be sure to seek competent professional guidance, as the tax rules can be complex and subject to change and the investment challenges considerable. For instance, decisions about things such as when to begin drawing Social Security payments or whether to roll retirement plan assets into an IRA will require careful planning.
Don’t overlook ways to support UD that result in retirement cash flow.
If you are precluded from making additional contributions to your IRA or qualified retirement plan, a charitable life income plan can be an attractive supplement to existing arrangements. Here are some of your choices:
- A charitable gift annuity makes favorably-taxed payments to you (or to you and your spouse) for life, plus you receive an immediate income tax charitable deduction, providing tax savings if you itemize. If you’re still working, you can defer the start of the payments, whereas if you are retired, you’ll likely want the payments to begin immediately.
- A charitable remainder trust is similar to a gift annuity in some respects, since both can provide income for life, but offers greater flexibility. This can be very appealing if you don’t need additional income now but would like to secure a source of payments in retirement, and also provides an immediate income tax charitable deduction.
- If you are age 70½ or older, you can make a Qualified Charitable Distribution (QCD) to UD directly from your traditional or Roth IRA of up to $105,000 in 2024, and the gift will not be counted in your income. Once you are 73 or older a QCD will satisfy your annual minimum required distribution and permit a tax-free gift of up to $105,000 to UD. Separately, drawing on assets in an IRA or a qualified retirement plan to make current gifts to UD can sometimes make sense for anyone over age 59½, although careful planning is required.
Finally, because retirement planning vehicles such as defined-contribution plans, tax-deferred annuities, and many IRAs contain income that has never been taxed, you’ll want to devote attention to your beneficiary designations. Previously untaxed amounts left to family members and other individuals will be taxed when received by them but are not subject to tax when received by UD. Likewise, tax savings can be combined with providing for heirs when certain retirement plan assets are used for a gift annuity or a charitable remainder trust at the end of your life.
Now that we’ve given you plenty to think about, please let us know if we can be of any assistance to you and your advisors!