The holiday season is here! This is my favorite time of year. We get to spend time with family and give thanks for all the blessings we have in our lives.
It’s the time of year to think about giving as well. Giving comes in many forms. Many of you went out on Black Friday and shopped ‘til you dropped. Others decide to exchange gifts with family, friends and coworkers. I want to highlight a few unique ways to give that you may not hear about as often.
Three Unique Ways To Give This Holiday Season
We’re going to briefly mention how you can give your required minimum distribution (RMD) to charity, how to contribute to a loved one’s individual retirement account (IRA), and how to give to a youngster’s 529 plan.
Giving Your RMD To Charity
The end of the year means our office is speaking with many of our clients about their RMDs. The IRS requires that individuals over the age of 70.5 years old take a certain amount out of their IRAs each year. The amount changes depending on how old you are and is required to be withdrawn before December 31.
One way you can give this year is by donating your RMD to a charity. You can contribute up to $100,000 to a charity to avoid paying income taxes on the distribution. You can choose to donate a portion or your full RMD, which may help to mitigate your tax implication of these withdrawals as well.
If this interests you, you should contact your retirement planner, and ask for help in setting up a direct transfer between your IRA and the 501(c)(3) organization.
Giving To A Loved One By Contributing To Their IRA
Another unique way to give this season is by contributing to a loved one’s IRA. Anyone who has earned income during this tax year is eligible to open an IRA. They don’t even have to be adults! Anyone with a job is eligible to open an IRA as well.
You can contribute to both types of IRAs: a traditional IRA, where the taxes are deferred until the money is withdrawn, or a Roth IRA, where contributions are made with after-tax money. When the recipient withdraws the money from their Roth IRA, no taxes will be due (the account holder can be subject to penalties, however, if they make an early withdrawal.)
If you choose to give by contributing to someone’s IRA, just be aware that you cannot give more than the person’s earned income that year, so if they earned only $3,000 this year, you can contribute up to $3,000 to their IRA.
Oftentimes, family and friends like to contribute to or start an IRA for young adults since time is on their side. The younger the recipient is, the longer he or she will have to let interest in the account compound and grow.
This can be a particularly good strategy for couples when one person has already made the maximum contribution for the year, and the other hasn’t. You can also contribute to your spouse’s IRA.
Giving The Gift Of Education Through Giving To A 529 Account
If you have a younger person in your life who you’d like to give to, consider giving the gift that will last a lifetime – an education! If the child’s parents have already opened a 529 account for them, all you need to do is contribute whatever amount you want. Just be aware that in 2019, you can give someone up to $15,000 before you need to worry about the gift tax.
Contributing to a 529 can be as easy as asking the parents for the account number and sending a check. My parents give to my children’s 529 this way. You can also request a link to the account and contribute online.
If these ideas do not suit you, consider giving savings bonds or gold or silver coins as gifts. I find it very cool when my in-laws get my children gold coins every year, so when they turn 18, they will have a large hoard of gold in their possession. What a great gift!
If you’re in the giving mood and want an alternative to consumable goods, consider one of these methods. Of course, as with all financial decisions, we’d suggest you talk to a financial professional before taking action, especially since their staff can often make the process even easier for you.
Learn more about Jason LaBarge at www.jasonlabarge.com.
Registered Representatives offering securities through Cetera Advisor Networks LLC, member FINRA/SIPC. Cetera is under separate ownership from any other named entity. Opinions expressed are that of the author and are not endorsed by the named broker dealer or its affiliates. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
Before investing, the investor should consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from the state’s 529 Plan.
Jason LaBarge, Managing Partner and Financial Consultant at Premier Planning Group
115 West Street, Suite 400 Annapolis, MD 21401 443-837-2520