401(k)s and IRAs

401(k)s, 403(b)s and IRAs are great retirement vehicles for working individuals.  You may have discovered since reaching retirement that between your 401k, pension plan, traditional IRA, Roth IRA, Simple IRA, and mutual fund accounts, some of these assets are simply not going to be needed.  In these situations, it might make sense to look at the benefits of gifting these retirement accounts to charity as part of your estate plan.

Consider the case of Mr. Blue.  Mr. Blue is in his early 40’s, and has made several job changes over the course of the last 20 years.  However, he has always contributed the maximum to the retirement accounts offered through his various positions.  As a result, he has a substantial amount in his Roth IRA, an average amount in his Traditional IRA, and a small amount in a Simple IRA from a job he held for only 10 months.  The Roth IRA is maximized each year at the $5500 allowable, and the Traditional is used only for roll-overs when he changes jobs.  Because Roth IRA distributions are tax-free, and because it is the largest of the accounts, this will be the first he taps into at retirement.  If the Roth is drained, he will then begin taking withdrawals from the Traditional IRA.  He recently filled out a Change of Beneficiary form for his Simple IRA leaving it to Friends University, and made the Office of Planned Giving aware.  Although the account is small, it is aggressively invested and will continue to grow and compound for at least 25 years.  By that time, using historical market rates of return, the account is likely to be eight times larger than it is today.

There is another way of making a gift through an IRA.  As of late 2016, Congress made the Charitable IRA Rollover permanent.  For those 70 1/2 yrs or older, the required minimum distribution (RMD) may be rolled over directly to charitable organizations without being recognized as income, and therefore is not subject to income taxes.

For information about how these tax-qualified funds can be invested with Friends, or to make Friends University aware of our inclusion in your estate plan, contact the David Alexander – Associate Vice President of University Advancement at 316-295-5648 or send an e-mail to david_alexander@friends.edu.