When you give to charitable causes you care about, you feel good. But that’s not the only advantage. The gifts you make now can help manage your taxes in retirement. Qualified charitable distributions (QCDs) and donor-advised funds (DAFs) are two of the most effective giving strategies for retirees.
QCDs allow you to donate to charitable causes directly from your IRA, while Donor-Advised Funds (DAFs) let you make a charitable contribution, receive an immediate tax deduction, and then recommend grants to charities from the fund over time.
The key to successful tax management in retirement is planning ahead. When I work with clients, I focus on planning required minimum distributions (RMDs) and choosing charitable giving strategies for retirees. With the right timing, we can maximize your tax benefits.
Step 1: Understanding Your RMD
Before examining giving strategies for retirees, it’s important to understand RMDs. If you have a tax-deferred retirement account, you are generally required to start withdrawing a minimum amount of money each year starting at age 73.
Many types of retirement accounts are subject to RMDs. Some of the most common include:
- Traditional IRAs
- SIMPLE IRAs
- SEP IRAs
- 401(k)s
- 403(b)s
In 2023, the SECURE 2.0 Act increased the age at which you must start receiving RMDs from 72 to 73. In 2033, the age is set to increase again to 75.
RMDs are taxable, and the amount you must withdraw is determined by the amount of funds you have, your life expectancy, and other factors.
When possible, I start discussing charitable giving strategies with clients a year in advance. Before deciding which giving strategies for retirees may work best, it’s important to have a clear picture of your expected RMD amounts.
Step 2: Qualified Charitable Distributions (QCDs)
If you have a traditional IRA and are at least 70½, you may make up to $108,000 in tax-free donations to qualifying charities. Your donation comes directly from your IRA, so it’s a way for you to satisfy RMD requirements without incurring tax liability.
QCDs are a valuable tax planning tool for many of my clients. Before making a QCD, we generally go through the following process:
- Discussing your giving goals
- Timing your gifts so QCDs are processed before RMDs
- Verifying that total QCDs don’t exceed your RMD
- Preparing paperwork and completing the transaction(s)
- Reducing your remaining RMD withdrawals accordingly
The QCD is one of the most popular giving strategies for retirees because it’s a win-win. Your favorite charitable organizations can benefit, and you reduce your taxable income.
Since QCDs exclude the donated amount from your adjusted gross income (AGI) entirely, rather than providing a deduction, they can have several additional benefits. A lower AGI may help reduce your Medicare premiums or improve eligibility for certain tax credits and deductions. For many clients, these downstream effects make QCDs even more valuable than they first appear.
Step 3: Donor-Advised Funds (DAFs)
Sometimes clients want to give beyond what they can contribute through QCDs, or they want to set aside funds to support charities over several years. In those situations, I often recommend exploring a Donor-Advised Fund (DAF).
DAFs can be especially useful for high earners who haven’t yet reached the age to make QCDs. In the years leading up to retirement, when income (and tax rates) are high, some clients choose to pre-fund a DAF. This allows them to benefit from the deduction when it’s most valuable and continue making grants to charities even during retirement years when their income (and deduction value) might be lower. Once clients reach age 70½ and qualify for QCDs, we often transition to that strategy for ongoing charitable support.
A DAF is a charitable giving account. You receive an immediate tax deduction when you fund the account, but you have the freedom to recommend grants to different charities over time.
DAFs aren’t funded directly from your IRA or from any RMD. Instead, most clients choose to fund them with appreciated assets like mutual funds or stocks. This strategy can help you avoid capital gains taxes and may also allow you to receive a charitable deduction, provided your total itemized deductions exceed the standard deduction.
Coordinating Giving Strategies for Retirees
In most cases, my clients choose a combination of QCDs and DAF contributions—and I help them find the right mix. Here’s how the process works:
- We identify your RMD amount and your charitable giving goals.
- We plan QCDs first to reduce taxable withdrawals.
- If you want to give further, we evaluate appreciated assets for DAF contributions.
I recently worked with a couple who had a large amount of highly appreciated stock in their brokerage account. They wanted to give significantly that year and continue supporting charities for several years. We contributed a portion of those shares to a DAF, allowing them to make a sizable gift upfront while deciding later how to distribute grants.
If you’ve never navigated charitable giving strategies before, the landscape can be confusing. But the rewards are worth it—you get to support meaningful causes, potentially reduce your taxes, and preserve the integrity of your broader financial plan.
Ready to Start Planning?
Charitable giving can be a meaningful part of your retirement years. Tools like QCDs and DAFs allow you to give in ways that fit both your values and your financial plan. At Deerfield, we call this living your Wealthwhile®—using your resources to create more of what’s worthwhile in life, including making a difference for others.
If you’re considering these strategies, start by talking with your financial advisor—who can collaborate with your tax professional to help align your giving with your broader financial picture. With some planning, you can support the organizations you believe in while managing your taxable income.
If you’d like to explore how these approaches might work for you, call (317) 469-2455, email ssteel@deerfieldfa.com, or use my online calendar to schedule a conversation.
Frequently Asked Questions About QCDs and DAFs
1. Can I make a qualified charitable distribution to any charity?
No. QCDs must go to an eligible 501(c)(3) organization. Private foundations, donor-advised funds, and supporting organizations do not qualify. Always confirm an organization’s status before initiating a QCD.
2. Can I use my IRA to fund a donor-advised fund?
No. IRS rules don’t allow direct transfers from an IRA to a DAF to count as a QCD. DAFs are typically funded with non-retirement assets, such as appreciated stock or mutual funds, often for gifts beyond what QCDs cover.
3. Can I make QCDs from a 401(k) or other retirement plan?
QCDs are only available from IRAs. If you have funds in a 401(k) or other plan, you would need to roll them into an IRA first (if eligible) to make a QCD. It’s best to review this option with a financial advisor before taking any steps.
About Susie
Susie Steel is COO, Wealth Manager, and Senior Shareholder at Deerfield Financial Advisors, a fee-only financial advisory and wealth management firm with offices in Indianapolis and Chicago. With over three decades of experience in financial planning, Susie’s approach has always been rooted in a spirit of service, treating each client as an extension of her own family. She simplifies the complex for clients, with the goal of creating a calm, trusting, and nurturing environment. Her unwavering commitment to the principle of “To whom much is given, much will be required” serves as the driving force behind her dedication, diligence, and empathy.
Susie obtained a business management degree from Ball State University, holds the CERTIFIED FINANCIAL PLANNER® designation, and held the Accredited Estate Planner (AEP®) designation from the National Association of Estate Planners & Councils (NAEPC) from 2013 to 2018. Susie is actively involved with an extensive list of professional organizations, including NAPFA (The National Association of Personal Financial Advisors), a premier association of fee-only financial advisors, and has served on multiple boards, committees, and councils. Her consistent recognition as one of Indianapolis Monthly’s “Five Star Wealth Managers” for the past decade attests to her outstanding accomplishments (2009-2025).
Outside the professional realm, Susie has contributed to her community through numerous efforts including her involvement in the Financial Center First Credit Union (FCFCU), the Indianapolis Children’s Museum Planned Giving Council, the Kiwanis Club of Northwest Indianapolis, and Junior Achievement. She mentors women through the CFP® Board’s “WIN-to-WIN” program, embodies the spirit of Rotary Club of Carmel, advocates for Indiana Canine Assistant Network (ICAN), and actively serves on the board of the Mary Rigg Neighborhood Center (MRNC).
Susie and her husband, Kevin, reside in Carmel, Indiana, where they raised their three children. Outside the office, her focus centers around family, spirituality, and fostering meaningful connections. Embracing the concept of the body as a temple, her personal growth is nurtured through practices like strength training, yoga, and meditation. In her leisure time, she enjoys strolls with her dog, Lulu, and indulges in movies, podcasts, books, and the theater. To learn more about Susie, connect with her on LinkedIn.
