There are lots of efficient ways to give your money. In this highlight, Brian and Bo give some insight on some options you might consider when opening a charitable giving account.

For more information on charitable giving, check out our highlight called, “How to Pick the Best Charitable Giving Strategy!“

1. Healthcare

The average American age 65 and older incurs $11,316 worth of medical expenses every single year. Many, or hopefully most, costs will be covered by Medicare or a Medicare Advantage Plan (or private insurance, if you retired before reaching Medicare eligibility). Medicare doesn’t cover everything, including some big expenses like vision, dental, and hearing, and a Medicare Advantage Plan won’t cover everything, either. One reason why medical expenses are getting higher in retirement is because we are living longer and longer. Most of us can plan on being retired for decades, which is great! However, this means you will likely need to plan for more medical expenses in retirement than previous generations.

Those retiring before Medicare eligibility will need to plan for spending even more on healthcare. Health insurance outside of an employer can be very expensive, and going without health insurance could be even more expensive. Planning to pay for healthcare on your own, without help from your employer or Medicare, can be very scary. At the end of the day, though, it is just an expense that can be planned for like any other kind of expense.

Once you reach your 50s, it would be wise to start planning for future long-term care you might need, and consider whether or not you have a need for long-term care insurance. About 70% of us will require long-term care services at some point, and the average stay in an assisted living facility is a little over two years. It is important to plan for these expenses before you need the money so your loved ones don’t end up scrambling to figure out how to pay for the care you need.

2. Travel

Nobody enjoys planning for what could be a massive amount of medical expenses in retirement and end-of-life care, but travel planning can be much more fun! With children now grown and out of the house and no more 9 to 5, retirement is when you can finally travel where you want, how you want, and when you want. That is, if you planned for those expenses before retirement.

Almost all Baby Boomers, 99%, said in a study that they planned to travel for leisure each year, taking about four to five trips. 47% plan to travel internationally, with the average Baby Boomer spending about $6,400 per year on travel. It is reasonable to expect travel expenses to go up in retirement, and they should; travel can be a great way to experience new cultures, places, and people that you may not have had an opportunity to while working.

3. Charitable contributions

Older Americans are the most generous group in the country. Those born before 1964 account for almost 70% of all charitable giving in the U.S., and retirees are much more likely to define success by how generous they are rather than by how much wealth they accumulated. Planning for those charitable contributions before retirement can help ensure you are on-track to accomplish your charitable goals, whatever they may be.

Not only can giving to charity help make the world a better place, there are also strategies you can employ to maximize the benefits the charity and you receive. Charitable giving accounts allow you to donate appreciated holdings directly to your preferred organization, which can reduce your tax burden (don’t worry, the tax burden doesn’t shift to the charitable organization; nonprofits are generally exempt from tax).

Only contributing to charitable organizations every other year may make sense if your amount of annual contributions are below the standard deduction. This stacking strategy allows you to maximize the tax savings, and, when coupled with a charitable gift fund, you can smooth your charitable distributions over the full 24 months so that charities do not do without.

Another strategy to maximize charitable contributions are qualified charitable distributions. This involves sending required minimum distributions directly to charity, which maximizes tax benefits for you and helps your preferred charity. Check out the clip from the show below where Brian explains QCDs.

4. Economic outpatient care

Even though your adult children have almost certainly left the nest by the time you retire, they could still be financially dependent on you. 22% of all adults receive financial support from their parents, and younger adults receive support at an even higher rate. Setting clear boundaries with your children while they are still under your roof can help them become financially independent adults when they move out. Make sure they know what to expect, as far as financial support, so they know what they will be responsible for and not to ask for more. It probably wouldn’t hurt to introduce them to The Money Guy Show early in life, either.

Financial support between parents and children isn’t a one-way street, and you don’t want to end up on the other side of the equation. 21% of Americans currently provide financial support to their parents. As detrimental as providing excessive financial support to your adult children can be, draining them of resources while their dollars are still extremely powerful if saved for retirement can be just as harmful.

Expenses in retirement can vary wildly depending on your goals and financial situation. Some expenses, like a mortgage payment, may go away entirely in retirement. Others, such as those above, may increase in retirement. Once your retirement portfolio reaches a critical mass, it may make sense to connect with a fee-only financial advisor and start planning how those expenses will be allocated to accomplish your retirement goals, paying for your kids’ education, estate and legacy planning, tax planning, and more.

Taxes are an unavoidable part of life, but there are ways to lower your tax burden. In 2020, there was a plethora of new legislation and law changes that could change your next tax bill. It’s important to know how those changes affect you and how to optimize your tax strategy. Here are the best ways to save money on taxes in 2020.

Special charitable deductions

Normally, charitable contributions are a below-the-line (itemized) deduction. That means if you take the standard deduction and donate to charity, you aren’t able to deduct your donation on your taxes. In 2020, though, the CARES Act created a special $300 above-the-line charitable deduction for cash contributions. If you expect to take the standard deduction and aren’t normally able to deduct your charitable contribution on your tax return, make sure to take advantage of the special rules for 2020.

If you are someone who typically itemizes, you can take full advantage of donating to charity. It may be more beneficial to donate clutter to stores like Goodwill and Habitat for Humanity instead of selling your stuff online or at a yard sale; you help charity, can deduct your donations, and save time. Advanced giving strategies, like donating appreciated holdings or qualified charitable distributions, can benefit both you and your charity of choice.

Harvest losses

While the S&P 500 and other large cap domestic stock indexes have mostly recovered from their lows in March, other sectors weren’t as lucky. If you have positions with sizable losses in a taxable investment account, it may make sense to harvest some of those losses. Harvesting losses locks in positions that are down; currently you can deduct $3,000 in losses against ordinary income, and losses can be carried forward to future tax years.

Free capital gains!

The lowest capital gains rate is 0%, and if you find yourself in this bracket, take advantage of it while you can. If your income is less than $80,250 for married couples and $40,125 for individuals in 2020, your long-term capital gain transactions could be taxed at 0%. If you have positions with a long-term gain in a taxable account, you may be able to take advantage of free capital gains.

Understand stimulus money

Earlier this year when the CARES Act was signed into law, millions of Americans received a $1,200 stimulus check (or more if you had a spouse and kids). There were income thresholds for determining the amount received; the good news is that if you received a stimulus check earlier this year, the money is yours to keep (even if you end up exceeding the income threshold in 2020). If you weren’t eligible for the rebate earlier this year but will be eligible based on your income in 2020, you can expect to receive your stimulus check as a credit when you file your 2020 taxes.

Unique distribution opportunities

Millions of Americans lost their jobs this year, and, subsequently, retirement account distributions were made available to many people that may not have previously had access. If you don’t need to withdraw money from your retirement account, don’t do it! It’s best to avoid withdrawing money from your retirement account at all costs, but the option may be available if you need it. In addition to unique distribution opportunities, many retirees who would have been required to take RMDs this year may now skip this year’s RMD. If you don’t need the money, skipping your RMD this year could be a great opportunity to let those retirement assets grow even more.

Max out retirement plans

Contributing to your retirement account or a traditional IRA can be a great way to lower your tax burden, but it may make more sense to contribute to Roth, pay taxes now, and save the tax break for your future self. If your combined marginal tax rate (state, federal, and any local income tax) is less than 25%, it may make sense to contribute to Roth while you’re in a lower tax bracket. If your combined marginal rate is greater than 30%, you might want to consider taking the tax break now and contributing to a traditional IRA or making pre-tax 401(k) contributions.

Avoid IRS penalties

The IRS can have some pretty stiff penalties if you make mistakes or don’t pay the amount of taxes you owe, so it’s important to get it right on the front-end and avoid IRS penalties. If your tax return isn’t very complex you may be able to use a free online filing service, but don’t be afraid to hire a professional when you’ve reached a level of complexity where it makes sense to. Paying someone else to do your taxes may seem expensive, but could potentially save you thousands.

Our latest show, “Top 10 Year-End Tax Planning Tips for 2020,” is our list of the 10 tax tips you need to know in 2020. If you haven’t already, visit our resource page to download our 2020 tax guide, and watch our latest episode now on YouTube below.

Remember the standard deduction

Ever since the standard deduction significantly increased with the Tax Cuts and Jobs Act of 2017, less and less people itemize deductions. It’s projected that only about 10% of Americans itemized last year. The standard deductions for 2019 are $12,200 for single filers and $24,400 for married taxpayers filing jointly. This means that unless your itemized deductions (including charitable contributions) are more than the standard deduction, you’ll be taking the standard deduction.

If you are like most Americans, your charitable giving won’t impact your tax bill. Just because you won’t get an extra deduction doesn’t mean you shouldn’t give, though. Charitable giving in 2018 experienced the largest decline since the Great Recession due to the changes in the tax code, so charities need your contributions now more than ever.

If you are in the roughly 10% of Americans who still itemizes, there are several different strategies you can deploy to make sure you are giving in a tax-efficient way. If you don’t itemize your deductions but do have required minimum distributions (RMDs), skip down to the qualified charitable distributions (QCD) section to learn more about how you may be able to lower your tax burden through charitable contributions without itemizing.

Goodwill or eBay?

When cleaning the clutter in your home, it may be easier to donate items to Goodwill or the Salvation Army rather than sell it on eBay. Both Goodwill and the Salvation Army have a donation valuation guide, so you’ll know how much you can deduct when tax time comes around.

It’s less time-consuming to drop stuff off at a donation center, too. If you choose to sell your clutter online, you’ll be responsible for taking pictures, listing the item, shipping the item, and providing customer service to buyers. You might also be responsible for paying taxes on money you make from selling your clutter online. If you do itemize your deductions, donating your unwanted goods to charity may be better than selling them online.

Charitable gift funds

Charitable gift funds, or donor-advised funds, are charitable investment accounts for the sole purpose of giving to charity. Donating long-term appreciated assets, such as stocks or bonds, could help to reduce your tax burden and give more money to charity. Using a donor-advised fund can also keep things simple. Making all of your charitable contributions through one account makes it much easier to keep track of contributions throughout the year, and know exactly how much you gave come tax time.

Qualified Charitable Distributions (QCDs)

Even if you are unable to itemize charitable contributions, you may be able to pay less in taxes by using qualified charitable distributions. QCDs allow you to gift all or a portion of your required minimum distribution (RMD) to a qualified charitable organization. If you don’t need the RMDs, or if you were going to give money to charity anyway, they can be a great way to reduce your tax liability. QCDs reduce your taxable income, therefore reducing your tax burden. Reducing your taxable income may also have other positive benefits, such as reducing your Medicare premiums.

You should give even if it doesn’t financially benefit you

If you don’t itemize your deductions or have any RMDs, you may not get anything back financially from giving to charity. That doesn’t mean you shouldn’t give. Studies have found, time and time again, that giving money away brings joy to the giver. Charitable giving also contributes to the betterment of society as a whole, helping to make the world a better place.

Charitable giving is something that will never be “worth it” financially. You may be able to save money on taxes through deductions or by lowering your taxable income, but you would always be better off financially if you didn’t give anything to charity. The non-financial benefits of giving money to charity must not be overlooked; giving makes people happier, and you have the ability to change the world in meaningful and significant ways by supporting charities.

It’s important to make sure you are giving in the most tax-efficient way possible, but it’s even more important to focus on the true reason for giving, and it isn’t for your own financial benefit. Giving is about helping others in need who are less fortunate, and making someone’s life a little brighter.

For even more ways to make your life more tax-efficient, check out our most recent show: “How to LEGALLY Avoid Paying Taxes This Year.”

In this episode, you’ll learn:

• Why you need to pay attention to Capital Gains Distributions
• How Charitable Giving can help you save BIG during tax season
• Which accounts need to be maxed out by year-end
• How to avoid surprise tax bills and penalties from the IRS

Research and resource from this episode:

• Donation Value Guide (Salvation Army)
• Valuation Guide for Goodwill Donors
• Retirement Plan and IRA Required Minimum Distributions FAQs (IRS)
• The Rules on RMDs for Inherited IRA Beneficiaries (Investopedia)
• Topic No. 306 Penalty for Underpayment of Estimated Tax (IRS)

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You’re not going to believe we’re giving away this advice for free! We’re so excited to share these untold secrets and help you take your finances to the next level.

WARNING: These ideas are advanced. While they may be exactly what you need to achieve financial abundance, each step involves complex rules and the IRS. You may not want to try these without a professional.

If these strategies sound like your next step, let us guide you to success! It may be time to take our relationship to the next level as part of the Abound Wealth family.

Here’s what you’ll learn in today’s episode:

Advanced Charitable Giving

• How to use Charitable Gift Funds like a pro
• How to give a larger gift to charity and get a larger tax deduction
• What a “QCD” is and why every non-profit, church, and person over 70 needs to know about it

HSA Fund and Hold

• 3 Ways to Use an HSA (and how most people miss best one)
• The powerful HSA strategy only 4% of people are taking advantage of
• What happens to your HSA if you pass away

Roth Conversions

• How to get the tax advantage of a Roth IRA in spite of the income limit
• The one “catch” to Roth Conversions
• A flow chart that lets you know if Roth Conversions are right for you

Mega Roth Conversions

• How to contribute $50,000 a year to a Roth IRA (We know it sounds crazy!)

Resources and Research Cited in this Episode

• IRS Bulletin (Covering HSA rules)
• Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2017: Statistics From the EBRI HSA Database

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If you have any questions (or just want to say hi!), feel free to reach out to us: brian@moneyguy.com and bo@moneyguy.com. You can also join the conversation on The Money Guy Show Facebook page or connect on Twitter @MoneyGuyPodcast.

Are generous people more successful? Cultural idioms like it’s a “dog-eat-dog-world” and “nice guys finish last” may have you thinking that while generosity is the “right” way to be, it doesn’t always pay-off in the end. And that somehow the “ends justifying the means” is the way to get to the top of the success scale.

Well, we have a contrary belief to the worldview of generosity and, as it turns out, there are studies that reveal that generosity does, in fact, lead to success!

Be sure to tune-in to this week’s short episode of The Money Guy Show to find out just how successful some generous people are and how they get there while others do not.

Here’s What You’ll Find Out in this Episode:

• Why being generous makes people happier according to a 2017 University of Zurich research study
• What Adam Grant, author of Give and Take: A Revolutionary Approach to Success found in his research and why givers are actually at the very top of the success scale
• Why some givers wind up on the bottom as pushovers and doormats while others have incredible success
• The 7 ways that givers can find success according to Forbes Senior Staff Editor Susan Adams
• How to use your passion and generosity to give you purpose and drive

Resources Mentioned in This Episode

• How to Win With Friends and Influence People by Dale Carnegie
• Influence: The Psychology of Persuasion by Robert B. Cialdini, Ph.D.

Enjoy the Show?

• Make sure you subscribe so you get updates, announcements, and exclusive post-show deliverables!
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  • You can also use #AskTheMoneyGuy on social media!
• Get your FREE copy of The 30-Minute(ish) Financial Plan

Tune In and Go Beyond Common Sense with the Money Guys

This show would not be what it is today without the support of our wonderful listeners. We strive to continue making the show better and your feedback is an important part of that process.

If you have any questions/suggestions/comments/concerns (or just want to say hi!), feel free to reach out to us: brian@moneyguy.com and bo@moneyguy.com. You can also join the conversation on Facebook or connect on Twitter @MoneyGuyPodcast.

If you enjoyed this episode, be sure to join our community! You’ll never miss special announcements and offers, plus you’ll get future podcasts and blog posts delivered straight to your inbox so you can get in on the action right away.

We cover how the new tax changes impact your charitable donations and the result it can have on your taxes.  Tune in to this week’s episode to learn how you can maximize your charitable giving under the 2018 tax changes.

Here’s what you’ll find out in this week’s show:

• Unique ideas on ways you can give and take advantage of tax breaks available
• Why you should consider gifting appreciated securities and what’s changed starting this year
• How you can give more to charity and avoid paying Uncle Sam altogether
• What Charitable Gift Funds (CGF) are, how they work, and the benefits they offer to you and the organizations you gift to
• How you can leverage CGF for after-tax investments
• What you can do differently in 2018 than previous years to take advantage of a charitable tax deduction
• What to do with your Required Minimum Distributions (RMDs)
• Ways you can handle your legacy planning under the 2018 tax changes

Charities near and dear to The Money Guy Show mentioned on the show:

Preston Taylor Ministries

Currey Ingram Academy

Tune In and Go Beyond Common Sense with the Money Guys

This show would not be what it is today without the support of our wonderful listeners. We strive to continue making the show better and your feedback is an important part of that process.

If you have any questions/suggestions/comments/concerns (or just want to say hi!), feel free to reach out to us:  brian@moneyguy.com and bo@moneyguy.com. You can also join the conversation on Facebook or connect on Twitter @MoneyGuyPodcast.

If you enjoyed this episode, be sure to join our community! You’ll get immediate access to 15 of our most recent shows, plus you’ll get future podcasts delivered straight to your inbox so you can get in on the action right away.

Tired of how early the holiday shopping season starts? This year, make a statement: vote with your dollar and put your money to better use than joining the shopping frenzy on Black Friday.

You’ll avoid the crowds (and the consumer culture!), have more time to spend with your loved ones, and build a better financial situation all at once. If you’re not sure what to do with your money instead, let us get you started with these suggestions for putting your dollars in a few other places.

Look at Your Retirement Accounts

Take a look at your 401(k) plans, traditional or Roth IRAs — whatever retirement account you have, pull it up and check out the balance. Are you on track to maxing it out? Here’s a quick guide on contribution limits for 2015:

• You can contribute up to $18,000 to accounts including 401(k)s, 403(b)s, Thrift Savings Plans, and most 457 plans. If you’re over 50, you’re eligible for catch-up contributions and may put in up to $24,000.
• Traditional and Roth IRAs have a $5,500 contribution limit. If you’re 50 or older, you can contribute $6,500.

If you need to catch up, you have time! Make an extra contribution and build your wealth — and financial security. (On track with your retirement goals? Throw some extra money into your emergency fund instead!)

Give to Others in Need

While it’s fun to shop for gifts for your friends and family, they, like you, probably have most of what they truly need. This year, why not allocate some of your shopping budget to your favorite charity?

You can make a cash donation, or you can work with organizations like Heifer International. With Heifer, your money can go toward purchasing something tangible for communities in need — and you can do so in the name of a friend or family member for their holiday gift, too. For example, you can “give” something like goats or cows. Or you can fund a project, like digging a well.

When you purchase something from the gift catalog, you can do so in honor of someone else — and they’ll get a lovely holiday card sharing what they gave to a community who will put this gift to excellent use.

Invest in Yourself

It’s really hard to hit the mall and all your favorite stores while shopping for others during the holidays — and not bring home a little something for yourself. After all, Black Friday does feature some great deals for savvy shoppers.

But instead of funneling your money to material possessions, consider how you can invest in yourself instead. This is a separate conversation from the investments you can do with your retirement plans and brokerage accounts. You can also invest in your knowledge, skills, and happiness.

Is there a hobby you want to pick up? How about an ability you have that you want to further develop? Or is there a skill you want to learn but aren’t sure where to start?

It may cost money to get involved with these things, but it’s okay to put money in your budget to invest in bettering yourself as a person or adding to what you know and can do.

If you want to learn a new skill but can’t afford traditional higher education, search out courses on Skillshare or Udemy. And don’t forget about YouTube! There are a number of tutorials there, and these videos are completely free.

If you want to engage in a new hobby and need lessons or training, wrap that into your budget — or consider if you can barter with an instructor or trainer. Can you offer them help with their business in some way in exchange for lessons? (One of our team members, for example, writes articles for her gym’s newsletter in exchange for a spot in a group class.)

Know that it’s okay to spend that money on yourself in this way — and it’s much more productive than spending money on Black Friday shopping.

Think about your values and what’s important to you this year. For most of us, Black Friday craziness is not high on our personal values list (which, instead, probably includes things like Family, Community, Growth, Happiness, or Wisdom). So instead of joining the crowds, consider using your money in a better way.

How do you want to put your dollars to use this year?

If you enjoyed this post, you’ll love free access to more content from The Money Guys. Check out our free resources here!

This week we dig into charitable giving, it’s a perfect topic for this time of year. Brian and Bo cover donor advised funds as well as some cool tax tips. We also discuss our goals for 2014 and give you a sneak peak of what to expect from us in the coming year.

Money-Guy News

Our social media sites are still fairly young and are quickly becoming one of our main focal points. So, we have decided to reward our followers with some really cool gifts. The Money-Guy crew is also going to team up with a charity that supports autism. Brian announced our apparel line, which will start with a couple of t-shirts. Brian is going to pay for the shirts up front and as they sell we are going to donate 100% of the proceeds. We are also looking for someone to volunteer some of their time if you are experienced with graphic design or printing t-shirts.

Charitable Giving

If you are donating clothes make sure that you are documenting the items you are giving and ask for a receipt that notes the clothes are in at least good condition. Always have a bank record or written verification from the receiving organization that details the amount given and the date of the gift.

Donor advised funds are always a great way to gift money or appreciated stock to charity. We are most familiar with Fidelity Charitable Gift Fund and Schwab Charitable programs.  If you need a large current year tax deduction a bigger donation can be made to the account this year and then you can grant the money or stock to the charity of your choice in later years. Essentially, when you make a gift to the charitable account you are making an irrevocable donation and are allowed to take the deduction in the year of the transfer. The down side is that if you grant the money to your charity in years following the transfer, there is no tax deduction because it has already been claimed upon the transfer.