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One of the great privileges of retirement is being able to give back.
After years of saving, working and providing for family, many people find generosity becomes one of life’s most meaningful pursuits.
Whether you’re supporting your church, backing medical research or helping your community thrive, giving brings joy and purpose.
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How you give matters. The way you structure your charitable gifts can impact not only the organizations you support, but also your taxes, your income plan and your family’s legacy.
That’s why more retirees are turning to donor-advised funds (DAFs). They’re not just for billionaires — nearly half of all DAF accounts in the U.S. hold less than $50,000, according to the 2024 National Study on Donor Advised Funds by The Donor Advised Fund Research Collaborative (DAFRC).
For many families, they offer a simple, tax-savvy way to align generosity with a broader retirement strategy.
A simple idea with flexible timing
Here’s how a DAF works: You contribute cash or appreciated investments into the account, often during a high-income year. That contribution counts as a charitable gift right away, which might qualify for an immediate tax deduction.
The funds can then be invested and potentially grow tax-free.
You recommend grants from the account to your favorite charities on your own schedule — whether that’s tomorrow or several years down the road.
That timing flexibility is what makes a DAF so powerful for retirees. Think about the final year of full-time work or the sale of a business or long-time family home. Those events can push taxable income to unusually high levels.
Contributing to a DAF in that same year can help offset the tax bill, while allowing you to spread the actual charitable dollars out slowly over future years.
Turning many small gifts into one smart move
Even without a big sale or income spike, DAFs shine when combined with a bundling strategy. Many retirees find their usual annual gifts no longer provide a tax deduction because they don’t exceed the standard deduction.
Instead of giving $10,000 each year and never itemizing, you might contribute $50,000 to a DAF once every five years. You’d receive a meaningful deduction in the contribution year, then direct grants of $10,000 annually to the same charities you’ve always supported.
From the charity’s perspective, nothing changes. From your perspective, you’ve captured tax savings that otherwise would have been lost.
Research shows that’s exactly how many retirees use DAFs. Contributions tend to be larger and less frequent — often in the $10,000 to $50,000 range, according to the DAFRC study — while grants flow steadily over time.
More than half the contributions are granted within three years, and nearly 60% are granted within eight years.
Beyond cash: Donating appreciated assets
Another reason DAFs fit so well in retirement planning is their ability to accept appreciated securities. Instead of selling stock and paying capital gains taxes, you can contribute the shares directly to a DAF.
You avoid the tax on the gain, receive a deduction for the full fair market value and free up your portfolio to be rebalanced.
For retirees who built significant wealth through employer stock or a single investment, this can be a win-win: reduce risk in the portfolio while increasing the impact of charitable giving.
Steady giving, organized and simplified
One common misconception is that DAFs “lock money away” and delay support for charities. The DAFRC study shows otherwise:
- 78% of accounts made at least one grant within three years.
- Median payout rates were 15% for active accounts, significantly above the 5% private foundations are required to distribute.
- Most funds get disbursed quickly. Over half of contributions are granted within three years.
In other words, most retirees use DAFs to organize and smooth their giving, not delay it indefinitely.
The system is also well organized. Instead of juggling dozens of receipts for different charities each December, you make one contribution to the DAF.
Come tax time, you track only that one gift. The sponsor handles the paperwork, the reporting and the distributions to your chosen nonprofits.
A built-in legacy
Nearly all DAFs (92%) include a succession plan. You can name children or grandchildren as advisers, giving them a hands-on role in charitable decisions after you’re gone.
Some families use annual grantmaking meetings as a way to pass down values of stewardship and generosity. Others choose to direct the remainder to a favorite charity outright.
Either way, it’s a simple, turnkey approach to legacy giving — without the complexity of setting up a private foundation.
Questions to consider
If you’re charitably inclined, here are a few questions worth asking:
- Do you anticipate a high-income year from retirement, a home sale or portfolio rebalancing?
- Could bundling several years of giving into one DAF contribution help you capture deductions more efficiently?
- Would donating appreciated stock reduce risk in your portfolio while maximizing charitable dollars?
- Do you want to involve children or grandchildren in carrying forward your charitable vision?
The bottom line
A DAF can help you do that. By bundling gifts strategically, contributing appreciated assets and aligning giving with high-income years, you can keep more of your retirement dollars working for the causes you care about, rather than sending them to Uncle Sam.
If giving is an integral part of your retirement vision, now is the time to explore whether a DAF fits into your plan.
With the right strategy, you can simplify your giving, strengthen your legacy and find peace of mind knowing your generosity is making the difference you intend.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
