brown on green, A Regular column about finances

Have Your Cake and Eat It Too

As retirement approaches, many people realize they have not saved enough. They try to compensate in the last few years by making large “catch-up contributions” to their retirement plan. Sometimes, however, we may not be able to contribute as much as we would like because of federally imposed limits. We need other ways to boost retirement income.

Others want to make a major gift to a Free Will Baptist ministry but are concerned the gift might not leave enough assets for retirement. Consider a 62-year-old couple with a $500,000 estate. They are still healthy and want to retire at 72. They like the idea of tithing on their estate and want to find a way to leave a $50,000 gift for ministry as well.

Free Will Baptist Foundation offers a solution that may allow them to do all three. A deferred payment gift annuity can guarantee income for retirement and become a significant gift for ministry when they go home to be with the Lord. They could set up a deferred payment gift annuity when they are both 62 and put the $50,000 tithe into the arrangement with a 10-year deferral.

They will receive a tax deduction of almost $17,000, which generates a tax savings of over $4,000. The income they receive, starting ten years later when they are 72, will be over $270 a month (or $3,250 a year), a guaranteed return of 6.5% for the rest of their lives. More than half of this income will be tax free, boosting the effective rate of return to 7.67%. This is a significant boost for their retirement income.

For them, the best part comes in knowing that—although they have received a nice income from their $50,000 tithe while living—the ministry they selected will receive a significant gift after their deaths.

Many refer to this type of arrangement as “having your cake and eating it too.” They receive the benefit of significant income from their assets, mostly tax-free and guaranteed for both their lives. At the same time, they also make a gift to ministry when they die. Contact the Free Will Baptist Foundation today to learn more about this or other planned gift ideas.

David Brown, CPA, became director of the Free Will Baptist Foundation in 2007. Send your questions to David at david@nafwb.org. To learn how the Foundation can help you become a more effective giver, call 877-336-7575.