Maximize Your Annuity Payouts Before It’s Too Late

January 16th, 2009 | by Chase |

If you were planning on holding off on making a charitable donation until after February, it may be time to reconsider. The American Council on Gift Annuities, the organization that operates under an exemption from federal antitrust laws and sets rates on charitable gift annuities, announced recently that they plan on cutting payout rates by as much as 15% for all annuities arranged after February 1.

So how does this affect you?

Every time you make a contribution of cash or stock to a charity a quarter of the amount is considered a charitable donation for which you get an immediate income tax deduction. In addition, the charity agrees to pay you a fixed rate every year for the rest of your life. The older you are when you make the donation, the higher your rate.

Under the current schedule, if a married couple in which both individuals are seventy years old enter into a second to die annuity after donating $100,000 to charity, they would get $5,600 in return every year. If that same couple were to make the same donation after February 1, they would only receive $5,200 per year. The change in figures computes to a payout drop of 7.1%.

Fifty year olds in a marriage would get $4,400 per year for the same donation but after February 1 would only receive $3,800, a 13.6% drop. A married couple of forty year olds would see a 15.4% payout drop.

This all being said, it may be smartest for your future if you make that donation (much) sooner than later to accumulate more over time. Who knows, maybe the charity you benefit may appreciate it a bit more, too.

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