Financial planning can help you and the Church

Special to The Criterion

Where are you now?

Financial and retirement planning are often discussed in relation to life stages.

Although there are many variables to consider when identifying a life stage, the second of three articles examines philanthropic planning options in these three stages:

• Stage 1—Building financial security for retirement.
• Stage 2—Formalizing a retirement plan and putting it into action.
• Stage 3—Maintaining the plan and enjoying retirement.

The stages can and do overlap, but these three broad phases provide a useful framework for financial and philanthropic planning.

Stage 1—Building financial security for retirement

The stage for saving for retirement covers many years—generally speaking—of your entire work life.

For those just starting a career, it is often difficult to imagine that the road to retirement actually comes to an end.

For people who are nearing the end of the career years, it is often surprising how quickly the retirement destination arrives!

In either situation, or all the places in between, there are several gift plans worth considering.

The deferred gift annuity is a gift plan uniquely suited for the person who wants to make an impact on our local Church, benefit from a current income tax deduction and receive a lifetime income starting at a designated time in the future.

When you set up a deferred gift annuity, you choose when you want the lifetime payments to begin. This flexibility allows you to tailor a plan to meet your specific retirement goals.

For example, the longer you defer the payments, the larger the income tax deduction and the greater the payout rate. Although a primary reason for funding a charitable gift annuity is to support charity, the rates are extremely attractive, even in these challenging economic times.

Stage 2— Formalizing and implementing a retirement plan

There is a crossover point where the focus shifts from building toward retirement to formalizing a retirement plan and putting it into action.

For many, eligibility for Social Security retirement benefits is the primary indicator that a shift is taking place. For others, it is reaching a particular financial goal or experiencing some other life event.

Turning assets into income is the primary planning challenge during Stage 2 when work ends and retirement begins.

Fortunately, there are gift plans that provide philanthropic avenues that can help you achieve this important financial goal.

Lifetime income starting now

If generating lifetime income is an interest of yours, there are several reasons to think about establishing a charitable gift annuity with payments starting now.

First, the payout rate locks in for life—and the payout rates are higher than you might expect. (See the accompanying rate chart.)

Second, you receive a current income tax charitable deduction, which can reduce your tax bill for the current year.

Third, the charitable gift annuity is easy to set up, and it’s a one-time process. You’ll never need to renew it or worry about falling rates.

Finally, you can establish a new gift annuity year after year if annuities continue to be a good tool for maintaining retirement income.

Example

Victor, age 72 and a consultant, is considering a CD renewal.

Being less than enthusiastic about the present renewal rate, Victor explores other options, including the charitable gift annuity. Victor likes the idea that, in exchange for his gift, he will receive lifetime payments at an unchanging payout rate.

A current income tax charitable deduction also is appealing. He learns that he can make a gift of $10,000 and receive lifetime annual payments of $590—a 5.9 percent payout rate. The gift would also provide an income tax charitable deduction of $3,983 for the current tax year.

From Victor’s perspective, the gift annuity has a lot to offer—substantial benefits for him and for the Church.

Charitable gift annuity payment rate chart—single life, current

Age Rate

• 70 5.8 percent
• 75 6.4 percent
• 80 7.2 percent
• 85 8.1 percent
• 90 9.5 percent

For ages between those listed, rates will be between two age markers.

For example, a 73-year-old annuitant would receive a rate of 6.1 percent. (These are the rates as of July 1, 2010. Contact our office to verify current rates.)

Stage 3—Maintaining the plan and enjoying retirement

Once the retirement threshold has been officially crossed, financial and philanthropic plans should be reviewed periodically to:

1. make certain that your financial goals are still being met, and
2. determine whether changes in priorities have altered your perspective on personal philanthropy.

Often, one of the rewards for hard work and sound planning is the opportunity to make a greater philanthropic impact during retirement.

• Retirement plan assets may be a good gift choice.

If these assets are left to an individual, income tax will be due when the individual receives the property.

However, if the Catholic Community Foundation receives the assets, no income tax is due because the foundation is a tax-exempt charity, and the full amount supports the work of a parish, school and/or archdiocesan agency.

• The charitable gift annuity may be worth even stronger consideration as age increases. The payout rate is fixed at the time you set up the gift annuity.

• Many retirees own a vacation home or second property free of debt that they no longer wish to keep. There are several tax-advantaged ways to make a gift of real estate.

As you work to build resources for your family and retirement, there are many gift options available to help you make an impact through philanthropy.

Your investment will provide you and your family with financial and intangible benefits, and also preserve our Catholic faith and create a lasting legacy for future generations.

If you would like more information or are interested in a confidential conversation regarding your planning goals, contact Ellen Brunner, director of planned giving, Catholic Community Foundation Inc., Office of Stewardship and Development, at 800-382-9836, ext. 1427, or 317-236-1427 or e-mail her at ebrunner@archindy.org.

Also visit our Web site at www.archindy.org/ccf. The first article can be found here. †