The Charitable IRA Boom

Open gift with fireworks from confetti 3d render

The Charitable IRA provision offers an attractive giving option for those aged 70½ or older. Here are a few reasons why you should be encouraging these gifts.

While many have speculated about the Boomer Bequest Boom, the reality is that it will be a decade or more before significant funds begin to be received at the passing of Baby Boomers. The oldest Boomers have just entered their 70s, and only a small fraction of charitable bequests come from people dying before age 80. In fact, the average age of charitable decedents is in the mid-80s and has been rising in recent years.

There are things you can do now, however, to help maximize gifts from this generation. In addition to charitable bequests, you can encourage more immediate funds by maintaining your primary focus on gifts with near-term benefits, such as cash, securities, real estate and qualified charitable distributions from IRAs.

Some financial institution studies estimate that Boomers currently hold $10 trillion in tax-deferred retirement plans and accounts. Congress has recently made permanent the Charitable IRA provision that allows donors to give up to $100,000 per year directly from their qualified IRAs to charity. Remember, however, that this tax provision does not apply to 401(k) or 403(b) plans. (See the February 2017 Give & Take article “Who Has an IRA?”)

Act now to educate donors

It’s up to you to educate your donors about this tax-favored giving opportunity.

In previous years, marketing of IRA gifts was often not scheduled until the end of the calendar year. Gift planners, kept waiting by legislative “extender” bills, were limited to sending a postcard here and an email there. With only days or weeks to act, naturally these efforts didn’t optimize results for many fundraisers. This marketing delay also often meant that many prospective donors had already taken their required minimum distribution for the year, and the Charitable IRA giving pocket was “empty.”

Boom times ahead?

A critically important factor likely to boost qualified charitable distributions from IRA holders aged 70½ or older lies in our changing demographics. The leading edge of the Baby Boom Generation is entering the “Charitable IRA Zone” this year. Last year Boomers born in early 1946 turned 70½, and millions more will reach this milestone in 2017 and be required to tap their IRAs and other retirement plans, regardless of the need for the funds. Approximately 10,000 Boomers on average are expected to turn 70½ every day over the next twenty years.

Segmenting CIRA prospects

Virtually every IRA holder of this age should consider Charitable IRA gifts. This tax-free method of giving is particularly attractive to non-itemizers, those who are still working past age 70, Social Security recipients who don’t want to experience benefit trimming increases or those with potentially taxable estates.

Potential donors include those who are considering small, medium and larger gifts. The largest number of gifts will be under $1,000. However, experience reveals that most of the dollar value will come from a smaller number of gifts between $10,000 and $100,000. The balance will fall in the middle. Surveys in past years have indicated there are more distributions of $5,000 than any other amount. The second most common distribution to a single charitable entity was the maximum amount of $100,000.

Getting your share of IRA gifts

If you are interested in making sure you receive your share of the coming Charitable IRA boom, contact Sharpe Group for more information at 901-680-5300 or click here. ■

Sharpe Group has several tools to help you educate donors on the benefits of giving from IRAs, including a strategic marketing guide, educational donor publications and complimentary postcard art and copy available for immediate download. Click here to learn more.

*Source: “Pulling Retirement Cash, but Not by Choice,” The Wall Street Journal, 01/16/17.

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