Charitable Giving Strategies for Every Stage of Life

As we get older and have more discretionary income, our ability to donate to charity increases. And while personal values, beliefs and interest in a particular issue area are the primary motivators for giving, donors can also benefit from strategically planning their philanthropy within the context of their overall financial and tax circumstances.¹

Charitable giving is something in which any age group can participate. Below are some tips and strategies for incorporating charitable giving into your plans at various stages of your life.

Recent college grads and others entering the workforce in their 20s are just getting established financially. Similarly, those in their 30s are starting families and raising children, which can be an all-consuming endeavor, financially and timewise. Donating to charity may not be at the top of the priority list but there are a few ways to get started.

Volunteer Your Skills and Discover Your Passions

Your 20s and 30s are a time of exploration. Use these decades to discover causes that resonate with you deeply. Attend charity events, volunteer and educate yourself about global and local issues. Offering time and professional expertise to nonprofits is a great way to get started when there may be other financial priorities beyond charitable giving early in one’s career. Any volunteering opportunity can provide as much personal satisfaction and fulfillment as the giving of dollars.

Set Up a Charitable Budget Starting with Small, Consistent Donations

At this stage, while giving in dollars may not be large, it is still important to get into a giving mindset. Consider donating a percentage of income, whether that might be 1%, 5%, or even 10%, to get into the habit of giving away some of what you receive. Financially, you might be just starting out, so opt for small, consistent donations. Many organizations value predictability in giving, no matter the amount. Make gifts to friends’ causes or identify your own.

GIVING STRATEGIES IN YOUR 20s-30s

Often, younger philanthropists will give cash out of their current income. In some cases, for those who started investing early, giving appreciated stock from a non-qualified (non-retirement) account instead of cash is a more tax-efficient way to support charity. Also check with employers about their matching gift policies as they often provide additional value to your chosen charities.

INCREASE YOUR IMPACT

Moving into the middle stages of life, individuals in their 40s and 50s are advancing in their careers and increasing earning potential. This means a larger ability to give and make an impact. By establishing a framework for giving earlier in life (like a percentage of income), individuals will naturally have a larger impact as their earnings increase.

Involve Your Family and Include Charitable Giving in Estate Planning 

Use this time to teach your children about the importance of giving. Involving them in charitable activities can be a powerful way to instill empathy and a sense of responsibility.

As children get older, parents will want to revisit estate plans to make the appropriate changes. Adding charitable recipients into an estate plan is a simple way to put something in place that does not cost you anything now because the gift is deferred. In addition to remembering family and friends, a bequest to charity in a revocable living trust is a simple act of philanthropy that can be changed down the road. Similarly, including favorite causes among the beneficiaries of a retirement plan or life insurance policy defers the actual gift until much later, can be amended and demonstrates the value of philanthropy today.

GIVING STRATEGIES IN YOUR 40s-50s

Donor-advised funds have exploded in popularity in recent years and are often funded with appreciated stock. Donors can open an account, add dollars today — and receive a tax deduction today — but decide later which charities will receive those dollars. In the meantime, those dollars are invested inside the donor-advised fund account and, with growth, will increase the amount that can be eventually given away.

Direct gifts to charities of appreciated stock from a non-retirement account remain viable, tax-efficient ways to give now as well.

Whether donating to donor-advised funds or doing direct gifting to charity, you should be aware that gifts may not be income tax deductible if you plan to claim the standard deduction when filing your taxes. This often leads to people “lumping” their gifting into the same tax year, or in other words making several years’ worth of donations into a single tax year when you will itemize taxes to benefit from the large gift, and then availing yourself of the standard deduction in the other years.

Consider Time over Money

If you are retiring, you might find that you have more free time. Volunteering your time, mentoring or leveraging your network can be incredibly beneficial to nonprofits.

Of course, volunteering at this stage of life becomes important as another way of giving back. Serving on a board or committee of causes held dear, participating in fundraising capital campaigns or simply offering time to help with an organization’s ongoing programs are all important ways to give back.

Mentor the Next Generation

This is a great time to integrate your children and grandchildren into your charitable journey. Sharing your charitable interests or providing guidance and resources for them to pursue their charitable goals can be a powerful way to pass charitable values to the next generations.

GIVING STRATEGIES IN YOUR 60s AND BEYOND

Heading into and through retirement, with assets having accumulated and grown, donors in their 60s and older have many options for incorporating philanthropic gifts into their financial plans, including:

1. Giving through your estate plan as mentioned earlier: a bequest in a will or trust or a beneficiary designation of a retirement plan or insurance policy
2. Using donor-advised funds as a vehicle for giving with the added benefits of being able to plan the timing of gifts for maximum tax efficiency and continue your family’s philanthropic legacy by naming successor owners such as children who can manage the fund after the original donors pass on
3. Establishing an advanced charitable trust to solve a specific financial or tax challenge, such as avoiding capital gains on the sale of investment real estate, diversifying out of a concentrated stock position or as part of a business succession or exit plan
4. For those 70 1/2 and older, using qualified charitable distributions (QCDs) to make charitable gifts from a taxable IRA account (a QCD takes place when an IRA account holder directs a distribution from the IRA to one or more charities — such charitable distributions are not taxable and count toward any required minimum distribution from the IRA)

Charitable giving is a deeply personal journey that evolves alongside us throughout our lives. Individuals at any age can engage in philanthropy, and the earlier you start, the more habitual and natural giving to charity becomes, whether it is giving of time or dollars. By adapting your strategies to your changing capabilities and insights, you ensure that your contributions make a meaningful impact.

Remember, the most important aspect of philanthropy is not the amount you give, but the thoughtfulness and intention behind your actions. Each decade offers unique opportunities to contribute to the world in a way that is both rewarding and reflective of our journey through life.

Speak with your Forum financial advisor today about your charitable giving values and goals.