There’s an important mental shift that often happens as retirement approaches. They’ve spent years accumulating, but now they’re wondering: “How do I steward this into my spending years?” This new perspective often carries an element of relief, but it can also bring up new questions like:
Will we have enough?
Can we give more freely?
How do we make wise decisions with the resources entrusted to us?
It’s no surprise these questions often surface around Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs). The rules, timelines, and requirements associated with these financial tools can make them especially complex to navigate. The good news is they also provide great opportunities for thoughtful giving and tax planning. The key to unlocking their potential is understanding how they work.
What is an RMD?
A Required Minimum Distribution, or RMD, is the minimum amount the IRS requires you to withdraw each year from certain retirement accounts, including traditional IRAs and most employer-sponsored retirement plans. Because many retirement accounts were funded with pre-tax dollars, the government eventually requires those funds to become taxable income. For most people, RMDs begin at age 73. The required amount is calculated based on your account balance and IRS life expectancy tables.
For some households, RMDs fit naturally into their retirement income plan. For others, they can create additional concerns, including:
- Higher taxable income
- Increased Medicare premiums
- Greater taxation on Social Security benefits
- Larger tax burdens for surviving spouses or heirs
In many cases, retirees discover they are withdrawing more than they actually need to spend, which leads to another important question:
If we already have enough, how can we use these resources more purposefully?
What happens if you miss an RMD?
Unfortunately, missing an RMD can result in IRS penalties. Recent legislation reduced the excise tax to 25% of the amount not withdrawn, and in some situations the penalty may be reduced further if corrected promptly. Even so, missed RMDs can create unnecessary stress and paperwork. That’s why it’s important to review distributions proactively and coordinate withdrawals within the broader context of your financial plan.
What is a Qualified Charitable Distribution (QCD)?
A Qualified Charitable Distribution, or QCD, allows individuals age 70½ or older to give directly from an IRA to a qualified charitable organization. Eligible individuals can generally give up to the IRS annual limit through QCDs each year, subject to current IRS rules and eligibility requirements.
For households already committed to charitable giving, a QCD can provide a meaningful (and more streamlined) planning opportunity. Instead of taking the distribution into your own account, paying taxes on it, and then making a donation to charity, QCDs allow the funds to be sent directly from the IRA to the charitable organization.
In the right circumstances, that approach may:
- Count toward satisfying RMD requirements
- Reduce overall taxable income
- Allow the donated amount to be excluded from taxable income
Can I use my IRA to support charitable causes?
Yes. For many retirees, charitable giving from an IRA is one of the more practical ways to align generosity and tax planning, with a few considerations:
- Funds must go directly from the IRA custodian to the charity
- The organization must qualify under IRS rules
- QCDs generally cannot be sent to donor-advised funds or private foundations
- Timing matters, especially near year-end
Because of these details, coordination is important. A missed step can unintentionally change the tax treatment of the gift. This is one reason charitable planning often works best when it is integrated into a broader retirement strategy (rather than treated as a separate decision).
Other tax-smart ways to support charities you care about
QCDs are not the only way retirees can give thoughtfully. Other charitable planning strategies can help families give more intentionally to organizations or causes they care about, while managing taxes along the way. Here are two of them:
Donor-Advised Funds
Some families use donor-advised funds (or DAFs) to organize and simplify their giving. A DAF allows you to contribute appreciated investments into a single charitable account, receive a tax deduction upfront, and then distribute gifts to charities over time as you see fit. They’re flexible, tax-smart, and convenient, and can be especially helpful if you’ve experienced:
- Growth in a non-qualified (non IRA) individual or joint account
- The sale of a business
- Higher-than-normal income
- An unexpected windfall
(It’s important to note that QCDs generally cannot be directed into DAF accounts. Even so, they can still work well alongside other charitable giving strategies.)
Child Called “Charity”
Did you know you can add a charity as a beneficiary of an IRA? This often-overlooked but simple concept is called “Child Called Charity.” Because traditional retirement accounts can create taxable income for heirs, some retirees choose to leave IRA assets to charitable organizations and pass other assets or tax-free life insurance on to family members instead.
Since charities generally do not pay income taxes when receiving donations, this approach provides a win-win scenario, for both the family and the causes they care about.
It’s important to remember that determining the right strategy depends on your personal goals, assets, and overall financial picture.
Areas that often create confusion
Waiting until December. Many retirees delay RMD planning until year-end. That can create unnecessary pressure, especially when charitable gifts, tax documents, or processing times are involved.
Giving directly instead of through the IRA. Some households continue writing personal checks to charities while simultaneously taking fully-taxable RMDs. In most situations, a QCD creates a more tax-efficient outcome.
Focusing only on this year’s taxes. RMDs affect more than a single tax return. They can influence Medicare costs, IRMAA, future tax brackets, and legacy planning decisions over time.
Treating generosity as a separate conversation. For many families, generosity is one of the reasons they pursued financial stability in the first place. Unfortunately, charitable goals often get treated as secondary, rather than integrated into the overall plan.
A thoughtful retirement plan should create space not only for spending and saving, but also for giving.
How does generosity fit into a retirement plan?
At Anthem Advisors, we believe retirement planning is about more than reaching a number.
As many retirees move away from accumulation, their questions become less about projections and spreadsheets, and more about purpose, stewardship, and freedom. In some cases, they simply need clarity. In others they need permission to slow down, retire confidently, and give more generously.
That doesn’t mean generosity should be disconnected from wisdom. It means charitable giving can become part of a thoughtful stewardship plan rather than an afterthought. For some families that may include:
- Increasing support for ministries, churches, nonprofits or charitable causes they care about
- Creating a long-term charitable giving strategy
- Thinking intentionally about the values and legacy they hope to pass on to future generations
The goal is not simply to accumulate wealth indefinitely. It is to steward resources thoughtfully in a way that reflects what matters most.
Bringing the pieces together
RMDs, QCDs, and DAFs are technical topics, but they can intersect and provide timely answers to deeply personal questions about purpose, stewardship, and generosity. Handled thoughtfully, they can help retirees:
- Meet IRS requirements
- Reduce taxes intentionally
- Support meaningful causes efficiently
- Align financial decisions with values of faith and family
In our experience, thoughtful planning tends to create more clarity than decisions driven primarily by fear or urgency. They are built around values, wisdom, and intentional decision-making over time.
And in many cases, generosity does not compete with a healthy retirement plan. It becomes a meaningful driver behind the plan itself. For help determining which tools are right for your plan, contact us to schedule a consultation today.
