Alphabet Soup

Retirement plans, like IRA for individual retirement account, can sound like alphabet soup. There are a lot of acronyms.

If a person is at an age where they must take a Required Minimum Distribution (RMD) from a retirement account, like an IRA, one option to consider is making a qualified charitable distribution (QCD). A QCD is a tax-free transfer from an IRA directly to a qualifying charitable organization, like Unity House, a 501(c)(3) non-profit organization.

How it Works

Required Minimum Distributions are the minimum amount of money that must be withdrawn from a retirement account if a person is past a certain age. An account holder can satisfy that requirement by having the distribution go directly to a charity they designate. Unity House, for example, is a 501(c)(3) non-profit organization that receives qualified charitable distributions from account holders who must take a required minimum distribution.

Helping charities may lessen tax burden for account holders

Retirement plans require minimum distributions after a certain age, but what if a person does not need the income? Directing a required minimum distribution directly to a charity does not count as income to the account holder, which can be a benefit to some. There are various pros and cons for the account holder, as well as limits, so the topic should be researched thoroughly.

Consult your Financial or Tax Advisor

One should do their homework, so they understand the implications now and at tax time, about making RMDs to QCDs.