• Athena Financial Group

Seventy, Tax Smart and Charitable!


You are a pretty nice person. You worked hard all your life, you saved and you give to various charities and nonprofits. You are turning 70 soon and time to start tapping into that IRA and take your required minimum distributions. But when you do your tax return the next spring, not only are surprised with the extra tax you owe, you are surprised to find out your Medicare premiums are going up as well.

It shouldn’t come as a surprise to anyone that the downside to so many people living longer lives, is rising medical. One of the ways that Congress is paying for it is to raise the Medicare Premium on affluent seniors. If you are single, making over $85,000 ($170,000 for married couples), your Medicare premiums will rise from $121.80 to $170.50 that is nearly $500 a year. Plus, the prescription benefit goes up as well. If you are so fortunate to make over $214,000 in income as a single person, your Medicare premiums will be over $4,000 more. It goes up even higher for more affluent folks.

Now it is no coincident that these premium increases are happening the same year the first baby boomers are having to take their REQUIRED MINIMUM DISTRIBUTIONS from their IRAs. Many retirees were able to let this money grow tax deferred during the initial phase of retirement but now have to take money out and it is throwing them into the higher bracket for both income taxes and Medicare surcharges.

For many retirees, they are already giving to charities, usually from their checking account, but I would like to suggest a way to be both charitable and tax smart. At the end of 2015, Congress made permanent the ability of people over the age of 70 to take their RMD (Up to $100,000) and directly donate it to the charity or charities of their choice. This will bypass the money showing up on the first page of their tax return (Thus not showing up for the Medicare Premium), AND it will not be taxable to them. A win win!

And don’t think you have to be a Rockefeller for this to be impactful. A client recently was bemoaning that her income went over the $85,000 threshold by only $1,000 and now her Medicare premiums when up $736.80 for the year. I suggested that this year she donate at least a $1,000 directly to a charity. She would save the taxes and the Medicare Premiums and would actually be neutral to her cash flow. Plus the charity would be so grateful for the support. She loved the idea.

As with anything involving taxes, you have to do this correctly so make sure to speak with your advisors first and the charity before sending money. The funds have to go directly from your IRA trustee to the charity. It can never touch your hands.

With a little planning, you can be tax smart as you age!

Diane Young is the President of The Athena Financial Group, a financial planning firm located at 900 W University Drive Rochester MI 48307. 248-453-5252.

Financial planning and advisory services offered through Athena Advisory Services, Inc.


705 Barclay Circle,  Suite 125 Rochester Hills,  MI 48307

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Advisory services offered through Athena Advisory Services, Inc. A Registered Investment Advisor. Tax Planning and Insurance Services offered through the Athena Financial Group.

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