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Being 70 ½: A Good News Story!

Today's blog comes from a personal experience of our Board President, Don Desonier. Here he talks about how required minimum distributions (RMDs) from retirement accounts can be handled in such a way as to 1) not be counted as taxable income and 2) benefit your favorite non-profit.


Like many people, I have a “short list” of charitable organizations I like to donate to each year. Included in my list are a couple of non-profit organizations, one of which is Old Friends Club.


I just discovered a cool way to donate to Old Friends Club (OFC) that not only benefited this wonderful organization. It also benefited me from a tax perspective. Let me explain!


If you have a tax-deferred investment account like an IRA, Simple IRA, or SEP IRA, and turn 70 ½, you are required to take out an annual minimum distribution from that account - known as an RMD. Normally, these withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free.


I recently turned 70 ½. When I arranged for my first RMD to come out of my SEP IRA in 2018, I had the entire amount distributed to me - which was then treated as gross taxable income for the tax year 2018.

I discovered a way to donate to OFC without a direct tax consequence to me

For 2019, I discovered a way to donate to OFC without a direct tax consequence to me - by making a Qualified Charitable Distribution (QCD) directly from the custodian of my SEP IRA, to OFC. And, because I needed to make my Required Minimum Distribution for 2019, this payment counted towards my RMD. I did this by instructing the custodian of my SEP IRA to cut a check from my RMD - payable to Old Friends Club - and sent to me. I then delivered it to OFC. As a 501 (c)(3) non-profit, OFC received this distribution tax-free. As for me - this amount of my RMD distribution was not counted as taxable gross income to me.

Don Desonier, JD, Certified Senior Advisor, and OFC Board President

It’s extremely important to note that for the above process to work, the distribution must meet certain requirements to be a Qualified Charitable Distribution. Make sure you contact your CPA for proper tax advice.

Here is a great article from Forbes that describes this process very well called, "The Best Way To Handle Required Minimum Distributions".




Do you know a family who might benefit from joining Old Friends Club or someone who you think would enjoy joining our team of volunteers? Please have them call us or contact us at our Old Friends Club Contact Us page.

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P.O. Box 2472, Kirkland, WA 98083

welcome@oldfriendsclub.org 

Tel: 425.681.9776

Old Friends Club is a 501(c)(3) non-profit, EIN 47-4792158

 © Old Friends Club 2020. All Rights Reserved.

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