Smart Charitable Giving Strategies for Retired Engineers

December 3, 2024 Brian D Gawthrop, CFP®

As a retired engineer, you’ve spent your life solving complex problems, optimizing systems, and perfecting processes. Now, as you think about giving back, it’s time to apply that same thoughtful approach to your charitable contributions. Whether you’re passionate about supporting education, environmental causes, or your local community, you can make your generosity go further with a bit of strategic planning.

Charitable giving isn’t just about doing good—it’s also an opportunity to reduce taxes, support your financial goals, and leave a legacy. But, just like engineering, it requires attention to detail and careful execution. And with the end of the year fast approaching, there’s no better time to act.

Why You Should Start Now

Many charitable giving strategies require coordination with financial institutions, appraisers, or your trusty financial planner. During the year-end rush, delays can creep in as custodians process a flood of last-minute requests. Some options, like transferring appreciated stocks or making Qualified Charitable Distributions (QCDs), need extra time to finalize. Acting now avoids the stress of tight deadlines and ensures your contributions count for this tax year.

Building Your Charitable Toolbox

Not all gifts are treated equally by the IRS. Here’s a breakdown of your options, their benefits, and the rules to keep in mind:

1. Cash Donations

What It Is: A straightforward gift of money—via check, transfer, or even a donor-advised fund (DAF).
Tax Benefit: Deductible up to 60% of your Adjusted Gross Income (AGI) for gifts to public charities.
Best For: Simplicity lovers and those who itemize deductions.
Pro Tip: If you’re not itemizing every year, consider “bunching” multiple years of donations into one, using a DAF to spread contributions over time.

2. Appreciated Stocks and Securities

What It Is: Donate stocks, mutual funds, or ETFs that have grown in value.
Tax Benefit: Avoid capital gains tax on the appreciation and deduct the fair market value (FMV) of the gift, up to 30% of your AGI.
Best For: Investors with a highly appreciated portfolio who want to avoid capital gains taxes.
Pro Tip: Review your portfolio for the lowest cost-basis shares to maximize tax benefits.

3. Qualified Charitable Distributions (QCDs)

What It Is: Direct transfers from your IRA to a qualified charity.
Tax Benefit: Excluded from taxable income and counts toward satisfying your Required Minimum Distributions (RMDs).
Best For: Retirees aged 70½ or older looking to support causes while reducing taxable income.
Pro Tip: Limited to $100,000 per year per individual, making this an ideal tool for large-scale giving.

4. Real Estate and Tangible Property

What It Is: Donating property or personal items like art, vehicles, or collectibles.
Tax Benefit: Deduction depends on how the charity uses the gift. If it’s related to their mission, you can deduct the FMV; if unrelated, you’re limited to the cost basis.
Best For: Those decluttering their homes or simplifying their estates.
Pro Tip: Gifts of property often require an appraisal and additional paperwork, such as IRS Form 8283.

5. Donor-Advised Funds (DAFs)

What It Is: Contribute to a fund now and decide later which charities will receive the money.
Tax Benefit: Cash gifts to DAFs are deductible up to 60% of AGI, while appreciated assets are deductible up to 30% of AGI.
Best For: Strategic givers who want flexibility in choosing charities over time.
Pro Tip: Use a DAF to manage large gifts efficiently while locking in immediate tax benefits.

The Fine Print: Rules and Limits

The IRS has specific rules governing charitable giving. Here are the highlights:

AGI Limits: Contributions to public charities are capped at 60% of AGI for cash, 30% for appreciated assets, and 20% for certain property gifts. Excess contributions can be carried forward for up to five years.
Documentation: Any gift over $250 requires a written acknowledgment from the charity. Gifts of property over $5,000 typically need a qualified appraisal.
Public vs. Private: Donations to public charities enjoy higher AGI limits than those to private foundations.

A Smart Giving Plan: Your Next Steps

If you’re ready to make an impact, here’s how to get started:

Take Stock (Literally): Review your portfolio, IRA, and tangible assets to identify potential gifts.
Work with a Pro: A Certified Financial Planner (like us at Five Cedars!) can help ensure your gifts are tax-efficient and align with your overall financial goals.
Act Early: Don’t wait until the last minute. Custodians, charities, and financial institutions are busy as the year ends, so plan ahead to avoid delays.

Why It’s Worth Doing Right

Charitable giving is more than a financial transaction—it’s a chance to support the people, causes, and communities that matter most to you. By making informed choices, you can maximize your impact while minimizing your tax burden. It’s not about overthinking or creating a flowchart (though we won’t judge if you do)—it’s about taking meaningful action now.

To make the process even easier, we’ve created a 2024 Common Deductible Charitable Gifts Summary to help you weigh your options. Download it below and start building your legacy today.

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With some thoughtful planning, you can engineer a legacy of generosity that will benefit both the causes you love and your financial future. Start today—you’ve got this!