Giving in Railroad Retirement

Transcript:
Merry Christmas, everyone. Learn some charitable giving strategies in railroad retirement.

Welcome, everyone, to the Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors, and wish everyone a Merry Christmas for this Christmas edition of the Highball Advisors Whiteboard. Today, I want to talk about giving, right? Charity in railroad retirement, right? Great subject this time of year, so I thought I'd tackle this one for you. Just give you some ideas about some strategies if you're interested in helping out charities.

There's a couple ways to do it. First of all, we'll start with this donating railroad stock, right? If you've been accumulating railroad stock over the years, it's probably appreciated pretty significantly for you. So if you're interested in giving appreciated railroad stock, the best way to do that is just to give the stock directly instead of selling it. You do not want to sell the stock, because if you sell the stock, you're going to have to pay the long-term capital gains on that, as opposed to just giving the stock, in which case you have no tax implication.

Also, I put down there depreciated stock, right? Let's just say non-railroad stock. You might have some losers in there. This is the reverse strategy here, right? You want to give cash instead, so you sell the depreciated stock, right? Sell those losers. Harvest the capital gain loss, right? So you can use that, write that off against your capital gains. And then you give the cash to the charity. So that's railroad stock, okay?

Next is for people who are doing RMDs, right? Required minimum distributions. You have to take the money, because the government wants their tax deferred 401(k) money or their IRA money. So what you can do is donate the RMD directly to the charity, in which case you don't have to pay taxes on that, right? You eliminate the income tax. However, you won't get the charitable deduction off of that. But it's a good strategy. Just give the RMD directly. All right?

Next one up is the donor advised fund, right? This is one that has been coming on recently. It's been seeing a lot of growth in this space. It's good if you have a high income tax year. You can just defer. You can take a lump sum of money, start a donor advised fund, and that will draw down your taxable income on the year, right? And then what you can do is you defer the distributions, right? So you take your tax deduction upfront, and then you defer where you want to send that money out later. So it's really good.

I'll give you an example. Let's say if you wanted to start a donor advised fund, say $100,000, as you go into retirement, right? And you say, "Well, I'm part of a church and I want to give them $4,000 or $5,000 a year I can see throughout retirement," right? You can do that now, take the tax deduction. And then that way, you've funded all your charitable giving in retirement, because you can just systematically withdraw 4% out of that every year. Because you can invest that money in the donor advised fund, keep growing it, which is great. It's also good for railroaders who might have a severance from leaving the railroad. It's another way to draw down your taxes. But you want to play it right. You want to look at your tax brackets and see what's a good amount that you want to do.

So anyway, I'll let everybody get back to their Christmas celebrations. I just wanted to share this with you, just some giving strategies that railroaders can use for railroad retirement. I want to wish everybody a Merry Christmas and a Happy New Year. Please subscribe to my YouTube channel. It's growing. Look forward to 2021. In the meantime, everyone, please stay safe, stay on track, and take care. So long, everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.from Highball Advisors, and all rights are reserved.