Were you born before 1954?
Do you know anyone else (a spouse, other family, close friend or business colleague) who is age 70 1/2 or turning that age this year, in 2023?
Here's why this matters: If you or someone you know is at or near this retirement age and have a traditional Individual Retirement Account (IRA) then this is worth a read.
IRAs are great! You get a tax benefit when you put money aside in one, and those dollars grow tax free until you hit retirement age (as defined by the Internal Revenue Service/IRS). Then you're required to start taking money out -- a specific amount based on you’re age and projected life expectancy. IRS rules call this a "Required Minimum Distribution" or RMD. Those RMDs are taxable, which is why you're required to make those withdrawals.
Many people rely on IRA savings to provide for comfortable retirement. But many others end up reaching retirement age and discover that some or all of those savings are no longer needed. Yet the withdrawals and tax obligations that follow are required nonetheless.
Here's another great way you can put those retirement savings to work Protecting Our Water and reduce your taxes at the same time:
- Instead of withdrawing, spending, and paying taxes on your RMD, you can donate some or all of your RMD to a qualified 501-c-3 nonprofit like Clean Water Fund. There's no tax, and you've satisfied the federal withdrawal requirement.
- Though, for anyone born on or after July 1, 1949, the feds have pushed back the age when RMDs are required until the year when you turn 73 (before 2023, the age was 70 1/2 or 72, depending on your birth year). Anyone can start making this kind of IRA donation once they turn 70 1/2.
- These IRA donations are called Qualified Charitable Distributions (QCDs) or IRA Rollover gifts. In fact, you are allowed to donate up to $100,000 from your IRA account per year to Clean Water Fund. Besides supporting a great cause, what you give from your IRA (up to that $100,000) does not get taxed. This is a huge potential benefit.
There are some additional important details and rules to follow carefully and keep in mind you'll need to initiate your gift well in advance of year-end (and there's no real reason to wait until the last minute). Read about more of those details here (cleanwater.org/IRA). Be sure to look at the very end for a bonus tip on how you can use your IRA to create a powerful Clean Water Legacy gift, simply by completing a beneficiary designation form for your account.
We encourage you discuss any or all of this with your financial advisor, tax accountant or attorney. Our Clean Water team would be glad to answer questions or help you initiate a QCD or IRA Legacy Gift for Clean Water. Just drop us a line, development@cleanwater.org. We'd love to hear from you at any time.
FIVE THINGS TO KNOW:
- IRA Gifts (QCDs) must be paid directly from your IRA account to Clean Water Fund (501-c-3 nonprofit, tax ID #52-1043444).
- The gift should be sent to Clean Water Fund's financial headquarters: Clean Water Fund -- IRA Gift, PO Box 188, Mt. Clemens, MI 48046-0188
- Your account manager must specify that this is a gift from your IRA account and provide your full name and address so Clean Water Fund can thank you and send you the appropriate receipt.
- Clean Water Fund must be able to receive and deposit your check by December 31 for it to count in the year it is sent. Allow plenty of time for this, and consider taking care of it early. QCDs may be made at any time.
- Gifts to Clean Water Action (a 501-c-4 nonprofit), while welcomed, can not be used for QCDs.
