How RMDs Turn Philanthropy Hyper

Required Minimum Distributions (RMDs) can be a useful tool for donors to make charitable contributions. Especially for those donors who do not need the full RMD amount for their living expenses. A Required Minimum Distribution is the minimum amount of money that must be withdrawn from certain tax-deferred retirement accounts, such as traditional IRAs, 401(k)s, 403(b)s, and other qualified plans every year. The purpose of RMDs is to ensure individuals gradually draw down their retirement savings and pay taxes on the distribution.

RMDs can benefit nonprofit organizations in several ways, particularly through charitable giving strategies as they pertain to capital campaigns and year-end fundraising appeals. Some key benefits of RMDs include: 

  • Qualified Charitable Distributions (QCDs): Individuals aged 70½ and older can direct their RMDs to a qualified charity without incurring income tax on the distribution. This enables donors to support an organization while satisfying their RMD requirement.
  • Tax Benefits: By donating their RMD directly to a charity, donors can reduce their taxable income, potentially lowering their tax liability. This can encourage more individuals to give to nonprofits. 
  • Increased Contributions: As donors become aware of the QCD option, they may be more inclined to contribute larger amounts to their favorite causes, leading to increased funding for nonprofits. Nonprofits can promote RMDs as a giving option, educating their supporters about how RMDs can benefit both the donor and the organization.

By leveraging RMDs and QCDs, nonprofits can enhance their fundraising efforts and build stronger relationships with their donors. Contact us today if you are ready to get Hyper about Philanthropy.