As of today, my latest book is available: More Than Enough: A Brief Guide to the Questions That Arise After Realizing You Have More Than You Need.

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved Enough, they have saved More Than Enough. Their desired standard of living in retirement is well secured, and it’s likely that a significant part of the portfolio is eventually going to be left to loved ones and/or charity.

A similar thing can also happen for people simply as a result of the way that spending in retirement usually works. That is, early in retirement, you have to spend at a very low rate — because you don’t know what investment returns you’ll get, you don’t know how long you’ll live, and you don’t know whether you’ll have massive medical expenses later in life. Said differently, it often makes sense to plan for an outcome in which you get poor investment returns and live to age 105 in a nursing home. But most likely, that’s not what’s going to happen. As a result, Enough ultimately turns out to be More Than Enough, most of the time.

And that realization — that you have (or are at some point likely to have) more than enough — raises a whole list of new questions and concerns. Some of those are financial (e.g., how much can I afford to give away to charity during my lifetime?), and some are non-financial (e.g., how should I communicate my estate plan to my intended heirs?).

This book’s goal is to help you answer those questions.

For reference, this book was written largely simultaneously with my previous book (After the Death of Your Spouse), and it actually shares some of the same material (specifically, some of the material about trusts, working with attorneys, and working with financial planners).

The book’s table of contents is as follows:

Part One: Non-Financial Considerations (What’s the goal? And why?)

1. Do You Have More Than Enough?
2. Who Gets the Money?
3. Talking with Your Kids or Other Heirs

Part Two: Financial Considerations

4. Giving and Spending During Your Lifetime
5. Learning to Spend and Give More
6. Impactful Charitable Giving
7. Impactful Investing
8. Reassess Your Asset Allocation
9. Trusts
10. Asset Protection

Part Three: Tax Strategies

11. Qualified Charitable Distributions
12. Donating Appreciated Taxable Assets
13. Deduction Bunching
14. Donor-Advised Funds
15. The Roth Question(s)
16. (State) Estate Taxes
17. Developing a Workable Plan

Part Four: Finding Professional Assistance

18. Working with an Attorney
19. Working with a Financial Planner

Conclusion: Mission Accomplished. Now What?

Afterword: Our Most Limited Resource

If you think the book would be helpful to you or to a loved one, I would encourage you to pick up a copy. (Print version here, Kindle version here.)

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved "enough," they have saved "more than enough." Their desired standard of living in retirement is well secured, and it’s likely that a major part of the portfolio is eventually going to be left to loved ones and/or charity. And that realization raises a whole list of new questions and concerns.

This book’s goal is to help you answer those questions.

The following is an excerpt from my book More Than Enough: A Brief Guide to the Questions That Arise After Realizing You Have More Than You Need.

A donor-advised fund is a nonprofit entity, often run by a financial institution (e.g., Vanguard, Fidelity, or Schwab). When you contribute money to the fund, it counts as a charitable contribution for tax purposes (i.e., you get an itemized deduction). And money you contribute to the fund goes into an account over which you have (limited) control. The money is no longer your money—you can’t take it out and spend it on groceries. But you maintain control of how it is invested. And at any time you can choose to have distributions (“grants”) made from the account to one or more charities of your choosing. (Such grants have no tax impact for you, because you’re not actually a party to those transactions. They are transactions between the fund and the ultimate charities.)

There are three main reasons why you might benefit from using a donor-advised fund:

1. You can get the tax deduction now, without yet needing to figure out how much you want to give to which charities.
2. They provide anonymity, if desired.
3. They make it easier to donate securities (e.g., shares of mutual funds or stocks).

Note that none of these is a tax benefit.

Some companies that run donor-advised funds promote them as if they offer tax benefits, when in reality it’s just the same tax benefits that come from charitable contributions in general. That is, you don’t save any taxes with a donor-advised fund that you wouldn’t have saved by simply donating directly to the ultimate charitable recipient(s) instead of donating to the donor-advised fund.

The benefits offered by donor-advised funds are administrative benefits. But these administrative benefits can be valuable.

Deduction Now, Decide Recipient Later

Just to reiterate, once you’ve contributed money to a donor-advised fund, that money is no longer your money. You cannot take it back out to spend on groceries. You cannot distribute the money to your nephew, even if he really needs it. And the money does not go to your kids when you die. So, in that sense, the donation decision is final as of the date that you contribute to the fund.

But there might be years when, based on your budget and tax planning, you decide that you want to make charitable donations of $X. And it’s often the case that this decision is made close to year-end (i.e., after you have a good idea as to your various amounts of income/deductions). And you might not, right at that moment, want to have to figure out exactly how many dollars go to which charities. So you can make a contribution to the donor-advised fund, and then take your time with determining the ultimate recipients of the dollars. (Though the ultimate recipients do have to be charitable organizations.)

Many people use donor-advised funds to implement a deduction bunching strategy. Deduction bunching can be done without a donor-advised fund: just make large donations every several years rather than smaller donations every year. So again, the donor-advised fund isn’t providing any additional tax savings. But with a donor-advised fund you can make the tax/budgeting decision now and decide which charity ultimately gets the money later. Again, not a tax benefit, but a real administrative benefit.

Anonymity, if Desired

The overwhelming majority of donations made in the U.S. are not anonymous. And that’s not terribly surprising. Most people want to be thanked. Plus, the simplest ways of donating to a charity (i.e., writing a check or pulling out the credit card) result in donations that aren’t anonymous.

But if you want to remain anonymous for any reason (even if that reason is just to stay off the mailing lists), donor-advised funds can be helpful. That’s because, when you make a grant from the fund to a charity of your choosing, you can select whether the grant will be anonymous or not. If you choose to remain anonymous, the charity would see, for example, that the donation came from Fidelity Charitable, but they wouldn’t know who the actual original donor was. The donor-advised fund serves as a middleman, shielding your identity.

Simplification of Donating Securities

When you donate assets that a) are not held in retirement accounts such as an IRA, b) have gone up in value, and c) you have owned for longer than one year, you get to claim an itemized deduction for the current market value of the asset and you do not have to pay tax on the appreciation. As such, donating such appreciated assets can be a very tax-savvy way to give.

But many charities, especially smaller ones, simply aren’t set up to accept donations of anything other than cash.

Donor-advised funds, on the other hand, are ideally situated to accept donations of securities, given that they’re often run by financial institutions. In fact, if your donor-advised fund is through the same company where you have your taxable brokerage account, the web interface will generally have a very easy way to simply select shares for donation and have them transferred to the donor-advised fund. And then from there, the fund can make a cash grant to the charity of your choosing.

What About Tax-Free Growth?

Sometimes people promote donor-advised funds by mentioning that they allow the money to remain invested and grow, tax-free, prior to being distributed to the ultimate charity. But this benefit is just an illusion. If you donate money directly to a charity, that charity can invest the money, and any gains that they earn will be tax-free (because they’re a tax-exempt organization).

Some people counter that most charities would not choose to invest the money (i.e., they would spend it shortly after receiving the donation). That may be true of course. But when you donate to a donor-advised fund and invest the money for some years, rather than donating immediately to the ultimate charity, all that is achieved in this regard is that you have deprived the charity of the choice to spend the money immediately. In most cases I would argue that the charity itself has better knowledge of its goals, plans, and financial circum­stances than the donor would have and is therefore in a better position to make this decision.

Drawbacks of Donor-Advised Funds

While donor-advised funds do offer useful administrative benefits, there are drawbacks as well.

The first downside is the cost. In addition to the costs of the investments held in the account, donor-advised funds typically charge an administrative fee as well. For instance, as of this writing, the donor-advised funds from Vanguard, Fidelity, and Schwab each charge an administrative fee of 0.6% per year (with a lower percentage for larger accounts). That said, the smaller the balances in question—and the shorter the length of time that money is left there—the less important such costs are.

A second potential downside of donor-advised funds is that they often impose a minimum grant size (i.e., for when you direct money to be distributed from the fund to a charity). In some cases though, that minimum is very modest (e.g., $50 at Fidelity or Schwab, as of this writing).

A final downside is simply that donor-advised funds cannot be the recipient for a qualified charitable distribution from a traditional IRA. So if you want to take advantage of QCDs, you must, at that time, determine the ultimate charity to which you want the money to go.

Simple Summary

• A donor-advised fund is a non-profit entity, likely run by a financial institution. From a tax standpoint, contributions to the fund count as charitable contributions. After contributing to the fund, you can control how that money will be invested, to what charity/charities it will ultimately be distributed, and when those distributions will occur.
• Donor-advised funds do not provide any unique tax benefits. Any tax savings you get from contributing to a donor-advised fund could be achieved through donating directly to some other charity instead.
• Donor-advised funds do, however, provide certain administrative benefits, such as separating the tax planning decision (how much to donate in a given year) from the ultimate decision of how much to give to which charity.
• Donor-advised funds also make it easier to donate appreciated securities
• Donor-advised funds also make it easy to donate anonymously.

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved "enough," they have saved "more than enough." Their desired standard of living in retirement is well secured, and it’s likely that a major part of the portfolio is eventually going to be left to loved ones and/or charity. And that realization raises a whole list of new questions and concerns.

This book’s goal is to help you answer those questions.

The following is an excerpt from my book More Than Enough: A Brief Guide to the Questions That Arise After Realizing You Have More Than You Need.

A qualified charitable distribution (QCD) is a distribution from a traditional IRA directly to a charitable organization (i.e., the check is made out directly to the organization rather than to you). Unlike most distributions from a traditional IRA, QCDs are not taxable as income. And QCDs count toward your required minimum distribution for the year in which you take the QCD. QCDs are limited to $100,000/year — per spouse, if you’re married. (Beginning in 2024, this $100,000 limit will receive annual inflation adjustments.)

To qualify for qualified charitable distributions you must be at least age 70.5. (Yes, it really is age 70.5. The legislation that increased the age for RMDs did not change the age for QCDs.)

Qualified charitable distributions work on a calendar year basis. That is, there’s no “I’m doing this in March of 2024, and I want it to count for 2023” option as there is for contributions to an IRA.

Another important point about qualified charitable distributions is that they cannot be taken from an employer-sponsored plan such as a 401(k) or 403(b). They must come specifically from traditional IRAs. (This can be a point in favor of rolling assets from an employer-sponsored plan to a traditional IRA.)

Qualified charitable distributions are generally more tax-efficient than taking a normal distri­bution, having it included in your taxable income, and then donating the money. In that second case (taking a taxable distribution, then donating the money), you get an itemized deduction. With a QCD, the donated amount is completely excluded from income which means you can still use the standard deduction in the year in question and still receive a tax benefit from your charitable giving. It also means that your adjusted gross income (AGI) is lower, which can result in other tax savings, because various other deductions and credits are based on your level of AGI.

One final note about QCD rules: a donor-advised fund cannot be the recipient of a qualified charitable distribution.

QCDs vs. Donating Appreciated Taxable Assets

When you donate taxable assets (i.e., assets that are not in any account with special tax treatment such as an IRA) that have gone up in value and that you have owned for longer than one year, you get to claim an itemized deduction for the current market value of the asset and you do not have to pay tax on the appreciation.

EXAMPLE: Carmen owns shares of stock that she purchased 18 months ago for a total of $19,000. The shares are currently worth $25,000. If she donates them, she will receive an itemized deduction for their fair market value ($25,000).

In other words, when donating appreciated taxable assets that you have held for longer than one year, there are two potential sources of tax savings. Firstly, you get an itemized deduction for the donation. And secondly, you do not have to pay tax on the appreciation.

When choosing between qualified charitable distributions or donating taxable assets, one advantage of QCDs is that you can take advantage of them while claiming the standard deduction. In contrast, donations from taxable assets (including regular checking account dollars) give you an itemized deduction. And itemized deductions are only valuable to the extent that they (in total) exceed the standard deduction for the year.

QCDs also have the advantage that they reduce your adjusted gross income, which can sometimes produce additional beneficial results, such as allowing you to qualify for another deduction or credit or bringing your income below a particular threshold for determining Medicare premiums. In contrast, the itemized deduction from donating taxable assets does not reduce your AGI and therefore will not produce any such effects.

With regard to donating taxable assets, donating appreciated assets that you have owned for longer than one year is strictly better than donating other taxable account dollars (e.g., cash in a checking account), because you get to claim an itemized deduction for the current market value of the assets, while not having to pay tax on the appreciation.

To briefly summarize, the typical order of preference for donations each year is:

1. Donating via QCDs (if you’re at least age 70.5),
2. Donating appreciated taxable assets with a holding period longer than one year,
3. Donating taxable account cash (e.g., checking/savings balances),
4. Donating appreciated taxable assets that you have held for one year or less,
5. Donating Roth IRA dollars (or donating traditional IRA dollars if you are younger than 70.5), and finally
6. Donating taxable assets where the current market value is less than your cost basis. (This option is unwise because your deduction is limited to the market value, and you don’t get to claim a loss for the decline in value. Better to sell the asset, claim the capital loss, then donate the resulting cash.)

Simple Summary

• A qualified charitable distribution is a distribution from a traditional IRA directly to a charitable organization (other than a donor-advised fund).
• QCDs are excluded from your gross income, but they still count toward your required minimum distribution for the year in which you take the QCD.
• QCDs are limited to $100,000 per year (per spouse, if you’re married). This $100,000 limit is scheduled to start receiving annual inflation adjustments beginning in 2024.
• You must be at least age 70.5 in order to take a qualified charitable distribution.
• For people with charitable intentions who don’t intend to spend their entire RMD in a given year and who are concerned about the tax bill they’ll face on their RMDs, qualified charitable distributions are an excellent solution. The overall result is that you were able to claim a deduction when you put the money into the account, the money grew tax-free over time while it remained in the account, and now it comes out tax-free as well.

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved "enough," they have saved "more than enough." Their desired standard of living in retirement is well secured, and it’s likely that a major part of the portfolio is eventually going to be left to loved ones and/or charity. And that realization raises a whole list of new questions and concerns.

This book’s goal is to help you answer those questions.

There’s a common refrain in retirement planning that you want to spend from tax-deferred accounts when your marginal tax rate is low (as is often the case in years after you retire but before Social Security and RMDs kick in). It’s true that it’s better to spend from tax-deferred accounts than from Roth accounts when your tax rate is low. But there are other dollars that you want to spend first every year.

Let’s consider an example. Imagine that, in a given month, you’re trying to decide from which account to draw your next $1,000 of spending. And let’s also imagine that, so far this year, your taxable income has not yet fully offset your standard deduction and credits for the year. In other words, you currently have a marginal tax rate of 0%.

The obvious approach — let’s call it Option A — is to take the $1,000 out of your traditional IRA. Option A sounds pretty good, because this would be a tax-deferred distribution that’s completely tax-free. That sounds like as a good a time as any to spend from a traditional IRA, right?

Probably not. Because there’s likely an Option B: spend $1,000 from your regular taxable checking account, and do a $1,000 Roth conversion.

In each case:

• You have spent $1,000,
• You have removed $1,000 from your traditional IRA, and
• You have incurred no tax bill.

But with Option A the remaining $1,000 is in your taxable checking account, whereas with Option B the remaining $1,000 is now in a Roth IRA. In almost every case, you’d rather have $1,000 in a Roth IRA than in a taxable account, because further earnings in the Roth will generally be tax-free.

The point here is that, if you have taxable-account assets that you can spend without generating any tax cost, it makes sense to spend those assets before spending retirement account assets. And if, when following such a plan, you have low-tax-rate space in a given year that you wouldn’t otherwise be using up, you can fill that space with Roth conversions.

In other words, every year before spending any dollars from retirement accounts (other than RMDs), you first want to spend from:

• Earned income (i.e., wages, self-employment income),
• Social Security income,
• Pension/annuity income,
• Interest and dividends from holdings in taxable accounts (note that this includes taxable and tax-exempt interest, as well as qualified and nonqualified dividends),
• RMDs from tax-deferred accounts, and
• Assets in taxable accounts that have basis at least equal to the current market value.

Again, the key thing that everything on that list has in common is that there’s no further tax-cost associated with spending these dollars. You have likely had to pay taxes on these dollars, but you don’t have to pay any more tax a result of spending these dollars.

Also, to be clear, this is not a discussion of how much to spend each year. For some people, it does not make sense to spend all of those dollars every year (so some dollars will get reinvested). And for other people, the intended total level of spending exceeds the categories above, so it then becomes a question of whether to spend from tax-deferred accounts, spend from Roth accounts, or liquidate taxable assets for which there would be a tax cost.

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved "enough," they have saved "more than enough." Their desired standard of living in retirement is well secured, and it’s likely that a major part of the portfolio is eventually going to be left to loved ones and/or charity. And that realization raises a whole list of new questions and concerns.

This book’s goal is to help you answer those questions.