Charitable annuities: For that warm and fuzzy feeling in retirement


For most people, the benefits received from a charitable donation are simply the "warm fuzzies" and a tax deduction. However if you happen to be sitting on some extra cash earning a paltry 3% in a CD then an annuity could net you an even greater return!

A charitable gift annuity is a vehicle for giving to charity which also provides income for life to the donor and their spouse based on a set rate tied to your age. While this may sound too good to be true, charitable gift annuities have been around for many years and are used by many respectable charities.

Charitable gift annuities can be set up with almost any charity and will provide payments back to the donor on either a quarterly, annual or semi-annual basis. These payments don't fluctuate with the market and will last your entire life, even if the return surpasses your original gift amount.

The rate for charitable gift annuities is set every year in July based on the discount rate and the longer you've been living the higher your interest rate is. Currently a 55-year old can earn 5.5% for life while an 85-year old can net a 9.5% return on the principle donation. These rates are based on a one-life annuity and will be slightly lower on a two life plan.