Hi, I'm a 53-year-old trying to retire on a modest nest egg; tracking expenses, practicing diversification, belt-tightening, etc.
One subject I haven't seen discussed on this immensely informative forum, is that of Charitable Gift Annuities (CGA's).
Say I have $100,000 that I want to put to work, generating income. According to Red Cross, Salvation Army, and other charitable org websites, I could get a CGA that would generate about $5000 income per year at age 55. Rates fluctuate based on age and interest rates on long-term bonds, just like an insurance company annuity. There would be some tax breaks the year of the CGA purchase. The $5,000 per year would be treated by the IRS as part income, part return on principal.
90% of the pros and cons of CGA's are identical to those applicable to single premium immediate annuities issued by insurance companies.
There are some important differences, however.
Although I haven't researched it for my state, I assume the insurance pools that protect annuitants in the event of the issuer's financial failure, wouldn't step in for a worthless CGA.
On the positive side, though, if you're hit by a bus the day you sign the contract, the windfall principal payment goes to charity, not an insurance company.
There are well-run charities (Red Cross and Salvation Army are just a couple of examples) that seem unlikely to default. An annuitant would have the protection of regular contract law to enforce the deal.
Some people are rich enough in retirement that they could lose a hundred grand without worrying about the impact on meeting their basic financial needs. Others, not so much. In the opinion of forum participants, would it be insane for a relatively young person, retiring on a bit of a shoestring, to buy a CGA? If so, what due diligence should precede execution of a contract?
All input is appreciated.
One subject I haven't seen discussed on this immensely informative forum, is that of Charitable Gift Annuities (CGA's).
Say I have $100,000 that I want to put to work, generating income. According to Red Cross, Salvation Army, and other charitable org websites, I could get a CGA that would generate about $5000 income per year at age 55. Rates fluctuate based on age and interest rates on long-term bonds, just like an insurance company annuity. There would be some tax breaks the year of the CGA purchase. The $5,000 per year would be treated by the IRS as part income, part return on principal.
90% of the pros and cons of CGA's are identical to those applicable to single premium immediate annuities issued by insurance companies.
There are some important differences, however.
Although I haven't researched it for my state, I assume the insurance pools that protect annuitants in the event of the issuer's financial failure, wouldn't step in for a worthless CGA.
On the positive side, though, if you're hit by a bus the day you sign the contract, the windfall principal payment goes to charity, not an insurance company.
There are well-run charities (Red Cross and Salvation Army are just a couple of examples) that seem unlikely to default. An annuitant would have the protection of regular contract law to enforce the deal.
Some people are rich enough in retirement that they could lose a hundred grand without worrying about the impact on meeting their basic financial needs. Others, not so much. In the opinion of forum participants, would it be insane for a relatively young person, retiring on a bit of a shoestring, to buy a CGA? If so, what due diligence should precede execution of a contract?
All input is appreciated.