Contributed by: Sandra Adams, CFP®
You spent your entire working life saving for your future retirement. You may have sacrificed things you wanted or wanted to do, at times, to make sure that you were saving enough for your future financial security. And now that you are retired, you may find that you saved so well that you have more than you need to support the retirement income you need for your projected life expectancy. What a problem to have!?!
Now, more likely than not, when you meet with your financial advisor each year, you discuss “what would add more to your life to add value and meaning” for which you might be using your excess funds. For many clients, this is a difficult question to answer. They feel that they have and have done most of the things that have meaning for them (or they are already doing them within their current cash flow and do not need to spend additional money to add further value to their life).
Many clients DO plan to leave legacy gifts to children, grandchildren, other family members, OR charities at the end of their lives. When there is excess in the retirement plan, even if a long-term care event were to occur for one or both spouses, the plan would still be in good shape, so giving thought to gifting during a lifetime might make sense.
For children, grandchildren, and other family members, at least taking advantage of the annual gift exclusion amounts (in 2025, $19,000 per person) to help fund retirement accounts, college education accounts, etc., is a wonderful way to gift. This is also a terrific way to help get family members started with their own financial planning and get them introduced to a planner (whether it is someone with the firm you work with or someone else they can trust). From a charitable perspective, beginning to use the various tools you have available, whether it be Qualified Charitable Distributions to gift directly from your IRA if you are over 70 ½, donating appreciated investment positions in an after-tax investment account so that both you and the charity avoid paying capital gains taxes (makes sense if you have enough other deductions to itemize), or potentially using a Donor Advised Fund to get a large deduction in the year you contribute cash or appreciated securities and then making grants from the fund to charities over time.
When you find that you have saved more than you ever thought you would, and you feel like spending to spend is not something you are not interested in doing, it might make sense to accelerate the legacy gifting you had planned for after your death and do the gifting during your lifetime. This will allow you to enjoy seeing the gifts “do their good work” during your lifetime and add value and satisfaction to your life that you might never have expected.
If any of these gifting strategies are of interest to you, please reach out to your planner at The Center to discuss. We are always happy to help!
Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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