How to Use Charitable Gift Annuities to Plan for and Protect Your Retirement Income
An interview by Nick G. Costa with Emily H. Hall ’49
Q: When did you graduate from Beaver, now Arcadia?
Hall: It is hard to believe, but it was 60 years ago in 1949. The college was much smaller and was out in the country in a rather rural setting. I enjoyed my time in Jenkintown and attending the college.
Q: What did you do after graduation?
Hall: I taught school for seven years and enjoyed the challenge. We had about 30 students per class, which is quite different from today. I taught first grade and found the experience to be positive and enjoyable. It was a good primer for raising a family, which came along later.
Q: Have you always lived in New Hampshire?
Hall: No, my husband’s work took us to Connecticut, Washington, D.C., Massachusetts and Maine. We recently moved from Maine back to coastal New Hampshire where we lived earlier. Since we loved skiing and sailing, we’ve lived in areas where both were available to our family. We have a son and a daughter, now grown, who shared these activities with us.
Q: What led you to seek out a charitable gift annuity with Arcadia University? How does it relate to your retirement plans?
Hall: It was a combination of several factors. For many years, we confined our giving to the Beaver College Annual Fund, but were well aware of the concept of giving through charitable gift annuity programs. In fact, we have three others, one of which goes back to 1998. The process of funding retirement begins with having a good estate plan. This takes more time than you would anticipate, but is manageable if you have a skilled attorney to assist in the process. With changing tax law, it is difficult for the layperson to keep informed. Once we made a host of decisions in the estate planning area, then it was a matter of funding our trusts and investing in ways that minimized the impact of taxes. As part of our estate plan, we chose to fund a portion of our retirement income needs with charitable gift annuities, which have many advantages including being easier to establish than a charitable trust. The University provides the annuity agreement for you and your attorney to review, which saves time and expenses. You can fund a gift annuity with as little as $10,000. We have charitable trusts, too, but they require much larger gifts.
Q: Since you have years of experience with gift annuities, how do you feel they have worked?
Hall: During the last 10 years, the rate of inflation and interest rates have had wide swings. By contrast, the charitable gift annuities provide a fixed rate of return we can count on. While the annuities have performed well, providing more income than, say, interest from other sources, by design they do not have an inflation indexer. But the tax advantages tend to off set this factor. If funded with appreciated stock, a good portion of income from the annuity tends to be in the lower capital gains tax bracket. By funding your charitable gift annuity with stock, you also avoid capital gains tax the year of the gift. There are a number of tax advantages.
Q: What are the risk factors?
Hall: Charitable gift annuities are backed up by the assets of the entity, in this case the property of Arcadia University. If you have not received a copy of the charity’s annual report, it is prudent to ask for a fi nancial statement. During a downturn in the market and interest rates, gift annuities continue to have payouts above most other alternatives. Stability is an important factor in retirement planning.
Q: How can charitable gift annuities meet personal and family goals? What about the fact that at the end of life there is no equity to be passed on to your children?
Hall: Since rates increase as you get older, they can be very attractive to individuals who are in their 70s, 80s or 90s. If you are in your 90s, you may just want to make a gift to the University outright. My husband, Bill, and I wanted our retirement plan to pay us income during both our lives, so this is refl ected in the way we established our charitable gift annuity. By making the annuity joint in nature (at a lower payout rate), each of us has the security of knowing that we will receive payments during our lifetimes. If you invest in a gift annuity when you are 70 or younger, and the other factors are positive, you may wind up with tax savings, which will produce a stream of income that can be reinvested. In certain cases, you may have the same value of assets to leave to your children as you used to fund your annuity. Plus, you have the satisfaction of making a gift to Arcadia during your lifetime. You also can select other assets to pass on to your children.
Q: Can you leave the funds for a certain activity within the University?
Hall: This depends on the University. If you want a certain program to receive the funds, it usually can be arranged. If you have no particular program in mind, you may want to determine if any “matched” programs are available. For example, perhaps during a class Reunion year or as part of a campaign, another donor matches the money you give and the receiving entity has double the pleasure.
Q: What are your concerns for Arcadia?
Hall: We are concerned that educational institutions maintain the highest standards of excellence and teach students the obligations attendant with good citizenship. Arcadia’s outreach program and the opportunity for students to familiarize themselves with foreign countries require alumni support.
Q: Would you recommend a charitable gift annuity to a friend or classmate?
Hall: We frequently do. Bill and I think a Charitable Gift annuity is a wonderful tool for planning and protecting your retirement income.
A charitable gift annuity is a great way to gain the security of a fixed level of income for retirement, and can be a welcome relief from the volatility of the stock market. A charitable gift annuity provides:
• A fixed level of income for life
• A charitable tax deduction
• Capital gains tax savings for appreciated securities
• The ability to lock in the value of appreciated assets
• The satisfaction of maintaining the highest standards of excellence at Arcadia University
Nick Costa is Arcadia’s Vice President for Development and Alumni Relations (2007-2012). For more information, visit www.arcadia.edu/plannedgiving.