4 Ways Retirees Can Give Back
Key Points – 4 Ways Retirees Can Give Back
- Charitable Giving Through QCDs Is Rewarding in Many Ways
- Retirees Can Give Back Through Volunteering and Mentoring, So Giving Doesn’t Always Need to Be About Money
- Legacy Planning Is One of the Most Popular Options for Retirees to Give Back, and Is No Doubt One of the Most Fulfilling
- Happy Thanksgiving!
- 19 Minutes to Read | 35 Minutes to Listen
Happy Thanksgiving, everyone! Dean Barber and Bud Kasper have so many things that they’re thankful for. As they celebrate Thanksgiving, they want to talk about the giving part of Thanksgiving. Dean and Bud will highlight four ways that retirees can give back on this holiday edition of America’s Wealth Management Show.
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Dean Barber: Thanks so much for joining us here on America’s Wealth Management Show. I’m your host, Dean Barber, along with Bud Kasper. What’s happening, Bud?
Bud Kasper: We’re ready for that Thanksgiving meal.
Dean Barber: Gobble, gobble. That’s right. Do you know my favorite part of Thanksgiving?
Bud Kasper: No, what?
Dean Barber: It’s the afternoon nap.
Bud Kasper: That’s going to become more difficult with you with grandchildren now entering your life.
Happy Belated First Birthday, Piper Lou!
Dean Barber: That’s probably the thing I’m the most thankful for this Thanksgiving. Our first granddaughter turned 1 earlier this month. Little Piper Lou is something else special. She changes my perspective on life even more than having kids did.
Bud Kasper: It really is. The nice thing about it is that you know the ultimate responsibility isn’t necessarily yours, but you get to enjoy all the fringe benefits. So, spoil away.
Dean Barber: Well, when we get an opportunity, my wife watches her every Tuesday and Thursday. Then, she gets to spend the night with us on Monday nights. We get a chance to see her a lot, which is amazing.
Bud Kasper: Terrific. Good for you.
Are You a Retiree Who Is Thankful for the Opportunity to Give Back?
Dean Barber: Yes, yes, yes. This time of year when we can think about what we’re thankful for. I also think there’s a big part of Thanksgiving that’s about giving and the ability to give back. There are a lot of ways through our planning process that we discuss giving back.
In our Guided Retirement System, we do this exercise called a prioritization exercise. We do this for people who want help with creating their financial plan. It’s more like a life plan because it’s not just finances. It’s about life because money without life is nothing. And life without money is miserable, so you need to tie those two things together. This exercise is designed to bring meaning from your life and your money together. It’s oftentimes the first time that people think about it that way.
There Are Many Ways That Retirees Can Give Back
One of the questions in our prioritization exercise is, what’s important to you? If giving back is important to you, here are four ways that retirees can give back that will elaborate on shortly.
- Charity: We’ll go in depth with discussing Qualified Charitable Distributions. Donor-Advised funds and bunching can also be utilized with charitable giving.
- Volunteering: We’re going to tell some stories of their clients who volunteer and the fulfillment we see in those individuals.
- Mentoring Others: Similar to volunteering, mentoring others is an excellent way that retirees can give back. We’ll share some examples of that as well.
- Planning for Your Family Legacy: Of course, a big focus of Thanksgiving is family. So, we’re going to highlight how planning for your family legacy is one of the most rewarding ways for retirees to give back to the ones they love most.
Let’s dive into these four ways that retirees can give back in a little bit more detail.
Ever since the Tax Cuts and Jobs Act went into effect, there’s been a very popular way for retirees to give back. The Tax Cuts and Jobs Act basically raised the standard deduction for people on their tax return to a level where people could no longer itemize. That took away from the ability to get tax deductions for charitable contributions unless you were giving a sizable amount of money.
Qualified Charitable Distributions
Those of you who are 70½ or older can do something called a Qualified Charitable Distribution. A QCD allows you to take money from your IRA and send it directly to charity and it doesn’t show up on your tax return. It’s not an income source. It’s not a taxable distribution because it goes directly to charity.
That does number of different things. First, since it never shows up on your tax return, it can’t jump you up into a higher bracket. It can’t mess with your Medicare premiums or cause more Social Security to become taxable. It can’t cause dividends or capital gains that could potentially be tax-free to be taxable, or taxed at a lower rate to be taxed at a higher rate.
So, if you are over 70½ and are charitably inclined, give from your IRA, not from your cash because you get a far better financial benefit and the charity gets the same benefit.
Bud Kasper: Yes, it’s wonderful. I’ll even go as far as say it’s the best thing that the IRS has come up with.
Dean Barber: Well, I wouldn’t go that far. I’d say the Roth IRA is the best thing that the IRS came up with.
Bud Kasper: OK. Well, again, taxable events are unpleasant. Giving to charity and not have any tax at all is a wonderful thing. Now, you need to follow the rules. Make sure that you do this right. And of course, we do that on behalf of our clients from that perspective.
Dean Barber: Your QCDs should ideally be done early in the year. If you wait until the end of the year, the custodians that are responsible for processing the Qualified Charitable Distributions can get overwhelmed, and sometimes they don’t get done in that year. But you’re right, Bud. There are some very specific rules that need to be followed to do the Qualified Charitable Distribution.
One of the big things is that custodian is going to send you a 1099-R. It’s going to look like that’s just a normal distribution from your IRA. It doesn’t denote anywhere that money went directly to charity.
As the IRA owner, you must contact that charity and say that you’re sending money from your IRA and need a receipt. And on that receipt, there needs to be some very specific language that says you didn’t receive anything of value for this gift.
Once you get that done, you take that to your account and your tax preparer and let them know about the charities that you gave to directly from your IRA as a Qualified Charitable Distribution. Then, the CPA can reflect it properly on the tax return. If the CPA just gets the 1099-R and you don’t tell them that part of that was a QCD, they don’t know. So, you don’t get the benefit.
How Bud Has Utilized QCDs
Bud Kasper: I’ve been using the QCD for the last two years to support the I Hate Cancer Foundation. It’s such a good feeling.
Dean Barber: Wait. You’re over 70½, Bud?
Bud Kasper: That’s right. Yeah. When we do that, we can share that with clients who are charitably inclined as well. In fact, when you do a financial plan with us, that’s one of the questions that we ask. We have people all the time that want to help others. Most of the time, that’s in a charitable format.
Giving back is not always about giving money. Many times, it’s giving time. It’s a volunteer type of thing. It’s giving back to the community. And it could be giving in a way where you’re passing education along to your children and grandchildren so that they can have a better opportunity in the future. There are all kinds of ways that retirees can think about giving back.
3. Mentoring Others
Dean Barber: I want to talk about some interesting stories of people giving back. There are a lot of people who are charitably inclined and generally want to help others. For our third and fourth ways that retirees can give back, I’m going to reference a friend of mine.
How Dean’s Friend, Tony Lewis, Gives Back
Tony Lewis has become a very good friend over the last eight years. I did an interview with Tony on The Guided Retirement Show. He’s a very interesting guy.
Bud Kasper: And very successful.
Dean Barber: Tony retired from the U.S. Air Force as a general. He coordinated the entire air parade of Desert Storm, retired from the Air Force, and became the CEO of ConAgra. After he retired from ConAgra, he began mentoring business owners and CEOs through a program called Vistage.
At 76, he’s still mentoring people, passing the education that he has had over the years, and giving back. He’s definitely not doing it for the financial reward. He’s doing it for the reward of watching others succeed.
4. Planning for Your Family Legacy
One of the things that I learned from Tony was how he has helped his two daughters succeed. Several years ago, Tony decided that he needed to pass the financial knowledge and family values to his children.
When his children were old enough, he started coordinating a family meeting every year. The family meeting was typically on a family vacation. They still do it even though the children are now very successful on their own.
The family meeting goes through the financials of Tony and his spouse. They review the trust that they have set up and rules in the trust. He talks about why he makes the decisions that he makes and how he goes about doing the research. He’s passing on 50-plus years of knowledge that he’s attained since graduating college to his children and grandchildren.
Try to Avoid Keeping Financial Family Secrets
There are so many people they are like a closed book. They don’t want their kids to know what they have. Bud, how many times have you seen someone who is in their 60s and they didn’t really know what their parents had when they pass away. It’s a mess and there’s money everywhere.
Bud Kasper: And that’s when jealousy can come into play.
Dean Barber: Maybe they did a trust but didn’t have all their assets titled in the name of the trust. Maybe they didn’t even have a trust. Or maybe all they had was a simple will.
I was visiting with one of my clients two weeks ago. His parents passed away early in 2022 within a couple of weeks of each other. That’s sad, but also kind of neat because they were in their 90s when they passed away. They got to live out what we try to build out as that ideal plan. They lived a very good, healthy life for a long time and passed away within just weeks of each other.
Anyway, he was telling me that he was blown away at the amount of wealth that his parents had. He had no idea. There were times over the last decade when he asked his parents if they needed help financially. But they said they were fine.
They had more $2 million. His family is still locating stuff as they’re cleaning out the house, doing auction, and those types of things. It’s taken him nine months to wrap his head around everything that’s there.
The Rewards of Financial Education
Well, that situation isn’t going to happen with Tony’s family because of their family meetings. My family has done the same thing. We like to have those family meetings. Once you review the financial plan and have the trust in place, you don’t need to talk about dollars. But the beneficiaries—the adult children—need to understand what the parents’ wishes were and why they’ve done the things that they’ve done. It creates a much better way to give because you’re not just giving dollars, you’re giving education.
Bud Kasper: Right. The importance of all that is taking a lot of the anxiety out of the situation when the second spouse passes away. If you have a plan and people understand the plan, then they can help execute the plan. Otherwise, I have seen jealousies take over. A sibling might not understand why their sibling was put in charge of something by their parents. It can be so simple if there was open communication about it.
Zoom meetings really help when we have families that are dispersed all over the United States. Virtual meetings bring them together to integrate all the family into the process and allow them to have some input.
The Beauty of Technology with Financial Planning
Dean Barber: Definitely. The technology has removed the geographical barriers to do that. Fifteen years ago, that would’ve been impossible for us to have. We would need to wait until their kids come back for a holiday or something or just do a phone call. That doesn’t really do the same thing as those virtual meetings can do.
Bud Kasper: For people that have what I’ll call their personal treasures where they want to leave something to one child, that can create difficult beneficiary situations due to jealously. But it’s much easier to understand if they know about it in advance. They can kind of work their way out of the emotions associated with that just by having some clarity associated with the ultimate distribution.
A Generational Impact
Dean Barber: These are fun examples and stories to tell. Bud and I have witnessed some amazing things happen in our clients’ lives during my 35 years and Bud’s almost 40 years in this industry. It’s gratifying. It’s one of the biggest rewards that we get for what we do is seeing how our financial planning and helping people can really impact their lives. And it’s not just our clients’ lives. It can be generational impact if we do our jobs right.
When we begin a conversation with a soon-to-be retiree or retiree that wants to give back or help others, we need to ask what they really mean by that. Is there a time or dollar issue?
Oftentimes people will want to do things to help their kids and grandkids. Maybe they want to help pay for their grandkids’ college so that their kids don’t have to sacrifice and save for that. Maybe they want to give their children a little bit of a head start from a financial perspective, but they don’t know if they can do it. They want to make sure that they have the resources to do so and still live how they want to in retirement.
If you don’t talk through that and you don’t build that into the financial plan, then a lot of times you’ll see people not giving while they’re alive and just passing a lump sum like the guy that I just talked about.
Bud Kasper: Right. Now that you’re a granddad, you can do something at an early stage because you know that seed is going to grow and blossom into a big tree. It’s a wonderful feeling.
More Stories About Retirees Giving Back
Dean Barber: Agreed. I want to keep talking about some of the cool things that Bud and I have witnessed over the years with retirees giving back. You start thinking about these things at this time of year. It’s very special. I have a lot of stories and the next one I’m going to share is a touching one.
This wonderful couple is retired. We put together their plan several years ago and they had done a fabulous job of accumulating wealth. They lived a frugal lifestyle. They never spent beyond their means and were always very conscious of what they did. They’ve traveled a lot and continue to travel a lot.
About five years ago, I told them, “I want you guys to understand what’s happening. With the way that you’re spending today, you’re going to accumulate a lot more money over your lifetime.” At this point, they were in their late 60s and they weren’t spending everything that their accounts were making.
So, I said, “What do you want to do with all this money? I know that you want to give some money to charity when you pass on, but do you want to do more now? And I know that you’ve stated that it’s important that your daughters get some money. What do you want to do?” And they said, “Well, what is our wealth projected to grow to?”
You Don’t Have to Wait Until You Die to Pass Along Your Wealth to Loved Ones
We kind of fast-forwarded out to when they’d be 85. I showed them the number and they were amazed. They asked what would happen if they started doing some serious gifting to their daughters now so that they could see them enjoy it. It was going to be their money anyway. Then, I figured out how much would be safe for them to give.
A Misnomer About How Much Retirees Can Give Back
This brings me to a point about a misnomer that people need to understand. People think that you can only give $15,000 per year without there being some adverse tax consequence. That’s misunderstood quite frequently.
Every American can pass a certain amount of money to the next generation without incurring an estate tax. If you give more than $15,000 per year person, then that amount over the $15,000 comes off what you’re allowed to give. Well, today we’re close to $13 million per person that you can pass to the next generation without any estate taxes.
If somebody had $2 million and wanted to give it all to the next generation now because they have a nice pension, Social Security, and don’t need the cash, they can give it all now without incurring tax consequences for you or for your children.
This $15,000 limit isn’t really a limit because you’re not going to have $26 million. That opened another discussion about how much they can give without affecting their ability to make sure they could do everything they wanted to do for the rest of their lives. The bottom line is that there was some substantial annual gifting with a substantial lump sum up front.
The Joy of Annual Gifting
The stories that this couple has told me over the last two or three years of the things that their children are doing with this money have been unbelievable. And they have the joy of being able to witness it. The husband of this couple told me a few months ago that they never would’ve done that without the financial education that we’ve provided. He said that it’s probably one of the best things that him and his wife have ever done.
I tell that story because there are a lot of people that would love to do that, but they don’t know if they can without it affecting their lifestyle in retirement. Without a solid financial plan and good forward-looking financial planning, it’s impossible to know.
Your Financial Plan Is Like a Permission Slip in Retirement
Bud Kasper: Yes, you’re right. You know what? It’s the plan allows you permission to do some of the things that you didn’t think you could have done because of the fear of tax consequences. When you’re gifting for the future, think about it this way. If you gave some money to your children, and they’re using that to offset their annual expenses, it just means that they can max out their 401(k). They don’t need to worry about the spending that is required from that perspective. It works out.
Then, you find the compounded benefit of that over 10 years, 20 years, and so on. This is how we can foundationally build a legacy that will live forever for our clients and more importantly for our clients’ heirs. Hopefully, the next generations do the same thing. You need to be aware of how to do this and the implications of what you do. Gifting can be a great thing and an excellent way for retirees to give back.
The Generational Gifting Doesn’t Need to Be Limited to Children and Grandchildren
Dean Barber: No doubt about it. We have so many more stories we can tell. I met earlier this month with a great couple that have been clients of mine for nearly 25 years. They’ve accumulated some good wealth, too, and never had children. They are giving money to their nieces and nephews and their alma maters. We’re figuring out which alma mater is going to get what, what assets are going to go to charity versus what assets are going to go to the nieces and nephews.
During their planning review, they said that there’s still money in their bank accounts that is building up that they’re not spending. So, they wanted to know if they could give more. Their nieces and nephews are maturing and successful. They’re doing the right things and are responsible, so they wanted to give them more.
Bud Kasper: I just had a review with a long-time client. One of the organizations he enjoys giving back to is Boy Scouts of America. It’s an organization that Modern Wealth Management supports as well. We strongly believe their cause and what they’re doing for the development of boys and girls in scouting. I was excited to share that with him. I can’t tell you the number of times that I’ve told people, “If you got this money, and you’re looking for gifts, and you love the university that you came from, endow a chair.” There are a lot of different things associated with that.
Spreading the Wealth
Dean Barber: I worked with a physician who wanted to give the building that he owned for his practice to his alma mater. His wife was against it because she wanted the kids to have the building or the money. So, I told them that he could do both. He could give the building now in a charitable remainder trust.
He was going to get a tax deduction for the future value and continue to get the income as long as he was alive. We used roughly 40% of the income and set up an irrevocable life insurance trust. That income from the building funded the trust so that each of his three sons got $1 million tax-free because there’s a life insurance policy in there. And the alma mater got the building. There are great things that people can do. A lot of times, they just don’t understand what they can do.
Dean Is Thankful for His Friendship with Bud
And as we tell all these stories about way retirees can give back, I’d be remiss if I didn’t say how I am thankful that I met Bud all those years ago. We had very similar values and ideals as far as how we were running our separate businesses at that time. We partnered up and have made a big difference for many people in Kansas City and nationwide.
Now that America’s Wealth Management Show is also a podcast, people can tune into it whenever and wherever and not just when it’s on the airwaves in Kansas City. We’ve educated a lot of people and made a big difference in their lives. When we start thinking about the things that we’ve done over the last three-and-a-half to four decades, it’s humbling.
Bud Kasper: It’s truly worthwhile.
Dean Barber: We’ve impacted people’s lives in ways that Bud and I are never going to see the full impact of.
And Bud Is Thankful for His Friendship with Dean
Bud Kasper: Thank you, Dean. I think we shared a common interest in making sure that people were receiving the best information they possibly could to be successful with their retirement and overall financial life. At that time, we really didn’t have a program that was dedicated to that point. Most financial radio programs then and now are just for personal gain.
It’s not that we run a non-for-profit company, but the interest that we have in our clients’ success is sincere. We really want you to have the type of experience that you could tell your friends about and say, “This was something to be thankful for.”
And They’re Both Thankful for the Modern Wealth Management Team and Clients
Dean Barber: Think about the legacy that you’re going to leave. And I’m not talking about the financial legacy. I’m talking about the legacy that you’re going to leave. When I started my company in 1996 after being in the financial industry for nine years, I wanted to create something that’s going to live well beyond me. And I think Bud shares that. He wants to create something that’s going to live well beyond him.
We’ve built an organization that isn’t the Dean and Bud show. It’s all about our employees and it’s about our clients. Everyone at Modern Wealth Management understands that the only reason they have a job is because they’re serving our clients. If we don’t do a good job serving our clients, we don’t have a business.
Bud Kasper: Right. And we’re thankful for that.
Dean Barber: So much.
Bud Kasper: We’re getting a little melancholy here, aren’t we?
Dean Barber: It’s just something that I enjoy reflecting on at this time of year.
Bud Kasper: I agree. It’s necessary to give thanks.
Giving Thanks Amid a Stressful Year
Dean Barber: Bud and I could talk about how stressful the year has been with all the upheaval in the markets, Jerome Powell and the Federal Reserve, everything that have gone on in Russia-Ukraine conflict, and the turmoil in our political environment.
But you know what? We’re going to wake up tomorrow and live in the greatest country in the world. As dysfunctional our society is, it’s still the greatest country in the world. And I think most Americans realize that. There are some that don’t get it. For those who don’t, I encourage you to travel a little bit. Get out and see what’s out there. America’s beauty is something that we should all be thankful for.
It Feels Good for Everyone—Retirees Included—to Give Back
Bud Kasper: I am thankful for that and the people in the armed services and first responders. A few weeks ago, my wife and I were going over to McDonald’s on a Sunday morning to get breakfast. I saw four guys that were in the driveway of the firehouse. My wife asked me what I was ordering all the extra sandwiches for. I told her I was going to give them to the firefighters. We drove by and I handed them the bag and thanked them for all they do. It feels good to do little things like that to let them know they’re appreciated.
I’m thankful for our first responders, especially in the police force, for putting their lives on the line all the time in this screwy world we live in. I just don’t understand people that have anything to the contrary of that.
Dean Barber: Agreed. I think for the most part, your feelings are shared by most Americans.
Bud Kasper: I think so.
Thankful for the Opportunity to Provide Financial Education
Dean Barber: Here’s the thing, Bud. People know that we run a financial firm. We do money management, estate planning, tax planning, Medicare, risk management—all those different things. It’s a service industry that we’re in, but that service changes people’s lives. It’s fun to watch.
Bud Kasper: Yeah, it is. And I think people sincerely realize that. You don’t have to become a client yourself. Just learn more about the financial education that we’re sharing. Maybe you’ll accept some of the values that we have and pass them on to people that you know.
Dean Barber: We’ve built our firm to continue to expand our services to more and more people. The vision that I had years ago was to help as many people as I possibly can. When I realized that there are only so many hours in a week and it can’t just be me, that’s when the company really started to evolve. That’s when we started to hire young people that are coming out of college with their financial planning-related degrees and developing them. We’re helping them do the same thing so that we’re multiplying that.
Clarity, Confidence, and Control in Your Financial Life
We have capacity for more people to join our family. That’s really what it feels like once people become a client of ours. They get a chance to meet with the multiple people that are here to serve them and give them the clarity, confidence, and control that they need to live their one best financial life.
Bud Kasper: And everybody is like-minded. We all are focused on the success of the people that we represent. That is a team effort. Everybody has expertise in certain areas. That’s why we need multiple people to expand our abilities to get it right for you.
We’re Thankful for You, America’s Wealth Management Show Listeners
Dean Barber: The last thing I want to say is that I’m thankful for all our America’s Wealth Management Show listeners. It’s the longest running educational financial show in the Kansas City area thanks to our loyal listeners.
We’ve had the chance to meet those of you that have listened for years and we’re here to help many more people as well. If you have been a long-time listener, you hopefully understand the importance of having a financial plan. We’re giving everyone the opportunity to get started with building a financial plan through our financial planning tool at no cost or obligation. You can begin to see some of those examples of how retirees can give back and so much more by using our tool. To access it from the comfort of your own home, simply click the “Start Planning” button below.
If you’d like to visit with one of our CERTIFIED FINANCIAL PLANNER™ professionals and get to know us better, you can schedule a 20-minute “ask anything” session or a complimentary consultation by clicking here. We welcome the opportunity to meet with you in person, by phone, or virtually. We can even screen share while using our financial planning tool so you can understand each step of the financial planning process.
Again, Happy Thanksgiving to You and Your Family!
Thank you all for joining us. We hope you and your family have a wonderful Thanksgiving week. I don’t know exactly what we’re going to talk about next week, but it’ll be fun and educational. We’ll be back with you next week.
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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.