Giving Without Regret: How to Balance Generosity and Financial Responsibility
The joy that we all feel checking off our holiday shopping lists, wrapping gifts, and exchanging presents with loved ones is often accompanied by another feeling: anxiety. Not just from the stress of getting everything done before the parties start, but from worries around money that can pile up this time of year. Some folks just can't look at a pile of presents without seeing price tags -- especially if money is a little tight this year or they're still adjusting to living off a fixed income in retirement. Worse, that anxiety might make you feel like you're doing the holidays "wrong," letting things that don't really matter keep you from enjoying the things that do.
But, as we discussed on a recent podcast, finding the right balance between generosity, personal fulfillment, and long-term financial security is an ongoing part of just about every financial plan. Holiday gift-giving just makes us experience that tug-of-war in a more heightened, time-bound way. And if you can use these three strategies to control your holiday giving this year, you can establish a strong foundation for sustained giving going forward.
1. Know your giving limits.
Yes, making a holiday budget can take some of the fun and spontaneity out of giving. But if you feel confident that you're giving within your means, you might feel greater happiness watching your grandkids open presents or writing a check to your favorite charity. Gifting budgets can also help couples stay aligned around holiday spending targets, which might prevent some grumbling when the credit card bills show up early next year.
A budget can also make saying No a little bit easier. Being around family and seeing news stories about folks in need pulls at heartstrings and purse strings alike. But nobody can help everybody. Once you've hit your financial giving limits for the year, think about other ways that you can help, such as volunteering your time, donating clothes or presents from last year, or setting up a consultation for your struggling college grad with your financial advisor.
2. Determine the best time to give.
I mentioned on our last podcast that, to my great pride, my adult children don't really need any financial help from me. They've been very successful in starting their own careers and families, and it brings me so much happiness to see them making progress toward their life and career goals.
But, at the same time, my kids and grandkids are never going to get more use out of an extra present under the tree, or an extra contribution to a 529 educational investing account, or tickets to the concert event of the year, than they will at this stage of their lives. And being able to share those experiences and see our generosity in action brings extra joy to my wife and I, especially around the holidays.
Of course, every family and every individual's portfolio is different. If you think the best thing you can do for your child is help them make a down payment on a house -- and that gift fits into your budget -- then make a plan with your advisor to do it. Other folks might decide that legacy planning vehicles like trusts and family foundations are the most appropriate ways to set their families up for success and to help organizations and causes that are important to them.
3. Use smart gifting strategies.
The "How much?" and "When?" of your giving plan can be very personal decisions. But if you're working with a financial advisor who knows you, and not just your money, you can incorporate some important giving strategies into your plan, such as:
- Annual Gift Tax Exclusion: The IRS allows you to gift $18,000 per recipient in 2024 without affecting either party’s taxes. Spouses can each give the max, doubling potential gifts.
- Qualified Charitable Distributions (QCDs): Seniors who are 70 1/2 and older can transfer part or all of their required minimum distributions (RMDs) straight to a qualified charity, potentially satisfying annual RMD requirements and lowering taxable income.
- Donor-Advised Funds: Contributions into these investment accounts can be tax-deductible. Growth is tax-free, and you can make donations from them to qualified charities.
- Appreciated Assets: Donating appreciated assets, such as stocks, can help you give while also reducing your capital gains for the year.
- Family Trusts and Charities: Use your legacy plan to create an organization that will keep doing good in perpetuity.
As you're counting down to holiday celebrations and a New Year, don't forget that the clock is also ticking on your ability to execute some of these gifting strategies for your 2024 taxes. My team at Keen Wealth is still booking year-end financial review sessions, so if you have some time to meet with us, we still have time to help you prepare your financial plan for 2025.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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