What Every Pastor Should Know about RMDs
Maybe it’s because I just attended my 50th (50th!) high school reunion. Perhaps it’s because I’m inching closer – but trust me, slowly – to the big 7-0. Whatever the reason, I decided it was time to understand the term “Required Minimum Distributions” (RMDs).
And what better place to learn but at the feet of the Faith Foundation Northwest? Ashi Guiles, a Financial Advisor with the Faith Foundation, was willing to spend a little time explaining the mysterious world of RMDs.
Pastors, if you’re too young to be thinking about retirement but know people in your congregation who are that age, you will want to read this.
If you have an IRA (Individual Retirement Account) and are inching toward age 73, you will want to read this, too.
Back in the day, when your parishioner set up their IRA, they did not pay taxes on the money they deposited into their IRA account. The taxes were deferred and their money grew because their IRA custodian invested it. (Roth IRAs don’t count because they already paid taxes on the funds before those funds went into the Roth IRA account.)
Uncle Sam, at some point, wants to collect those deferred taxes. When does Uncle Sam get to collect? When that money is withdrawn from the IRA.
However, here’s a great way for folks to avoid paying taxes (legally!) on their IRA. The IRA custodian can make a donation to your congregant’s church or to a 501c3 nonprofit organization on their behalf.
- The magic age? One must start taking money out of their IRA when they reach the age of 73 (that’s why it’s called a Required Minimum Distribution).
- What if someone wants to start giving away money earlier with tax benefits too? Hooray! If someone is 70½, they can give a Qualified Charitable Distribution (aka QCD). The same rules apply as an RMD.
- Who lets them know how much money they have to give? The person who is managing the IRA is responsible for letting your church member know when they must use this money and how much they must give away. If they use the money to pay bills or go on a vacation, they will pay taxes on it and if they don’t take money out, there will be significant tax penalties.
- Who can be the beneficiary of the RMD/QCD? Your church. If your parishioner gives their RMD/QCD to your church or to a 501c3, they will not pay taxes. Once again, the donation must go directly from the IRA custodian to the church (and not to a Donor Advised Fund).
Pastors: Why should you be interested in this – especially if you are nowhere near the age of 70½ - 73?
RMDs and QCDs might be a good source of funding.
It’s a great tax benefit for the retired people sitting in your pews.
It’s super convenient for your parishioners to donate since all the work is done via their IRA custodian.
Julia Frisbie, Executive Director of the Faith Foundation Northwest has an excellent video that further explains RMDs/QCDs.
Pastors (and Finance and Generosity Committees) here's where you come in:
- Remind your people that this is a way to give.
- Educate your people. Let them know the things their RMDs/QCDs will make possible for mission and ministry.
Many thanks again to Ashi Guiles of the Faith Foundation Northwest for taking the time to explain the relatively simple way for retirees to give to the place that feeds them spiritually.
Who knew that retirement could unleash generosity? Hallelujah!
Image credit: ChapGPT
###Cesie Delve Scheuermann (pronounced “CC Delv Sherman,” yes, really) is a Stewardship Consultant for the OR-ID Annual Conference. She is also a Senior Ministry Strategist with Horizons Stewardship – helping with capital campaigns and encouraging more generosity. For 25 years, while working as a volunteer and part-time consultant, she has helped raise millions of dollars for numerous churches and non-profit organizations. The most popular song (after Stairway to Heaven, of course) at the 50th reunion? We Are Young.
You can reach Cesie at inspiringgenerosity@gmail.com, at CesieScheuermann.com, or at cesieds@horizons.net. Want to schedule a meeting? She’s got you covered!
Schedule a meeting now.
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