Navigating the Financial Impact of Caregiving: Understanding Sequence of Savings Risk

Written by: Christine Parker, CFP®, APMA®, CSRIC®

As a working family caregiver, balancing the demands of caring for an older parent or loved one with managing your career and financial security can be overwhelming. Many caregivers reduce their work hours or leave their careers early to provide care, significantly impacting their retirement savings and long-term economic health. One of the critical financial challenges caregivers face is the sequence of savings risk.

What is the Sequence of Savings Risk?

The sequence of savings risk refers to the financial challenges caregivers encounter when they are forced to reduce or pause retirement savings due to caregiving responsibilities. This can occur in several ways:

Reduced Contributions to Retirement Plans: When you cut back on work hours or leave the workforce, your retirement accounts, such as 401(k)s, 403(b)s, or IRAs, decrease, limiting your future savings.
Fewer Employer Matching Contributions: By reducing work hours or stepping away from work, you may miss out on employer matching contributions, which can substantially impact the growth of your retirement savings over time.
Lower Social Security Benefits: Social Security benefits are based on your top 35 years of earnings. Work fewer years or at a reduced income. Your Social Security benefits in retirement may be lower than if you had continued working full-time in your higher earning years.
Lower Pension Benefits: Defined benefit pensions are typically calculated based on years of service and average salary, so reduced earnings or time worked can decrease the total pension amount.

Together, these factors create a savings gap that makes it more challenging to accumulate enough wealth to support a secure and comfortable retirement because Americans live longer and healthier lives.

The Impact of Caregiving on Financial Security

Research shows that many workers, including executives and professionals, leave to care for aging family members due to a lack of workplace flexibility and support services. This issue affects individuals across all income levels and career stages. The decision to leave the workforce for caregiving can lead to reduced income, stalled career advancement, and a growing wealth gap as retirement approaches.

Mitigating Sequence of Savings Risk

To protect your financial future while taking care of yourself, consider the following steps to minimize the sequence of savings risk:

Develop a Flexible Financial Plan: Create a plan that considers caregiving responsibilities and potential reductions in income while staying focused on your long-term financial goals. Work with a CFP® professional specializing in planning for individuals managing caregiving duties and who can help you navigate these complexities. To find a qualified CFP® professional, visit the CFP® Let’s Make a Plan website. [CFP® Let’s Make a Plan Website] (https://www.letsmakeaplan.org/find-a-cfp-professional).
Maximize Contributions When Possible: If you are still employed, contribute as much as possible to your retirement plan, mainly if your employer offers a matching program. This will help counterbalance future savings shortfalls.
Leverage Catch-Up Contributions: If you are over 50, take advantage of additional catch-up contributions to your retirement accounts to close the savings gaps created by caregiving-related work disruptions.
Build an Emergency Fund: A substantial emergency fund can prevent the need to withdraw from retirement savings during unexpected caregiving out-of-pocket expenses, preserving your long-term investments.
Consider Care Options: Professional care services like those offered by Sagepoint Senior Services can provide respite and ease some of caregiving’s emotional and financial burdens. Sagepoint offers services like adult day care, assisted living, and memory care, allowing you to continue working and contributing to your retirement savings while ensuring your loved one receives excellent care. Explore employee benefits programs and public and private support services for caregivers.

Maryland’s Family and Medical Leave Insurance (FAMLI) Program

In 2025, Maryland will launch the Family and Medical Leave Insurance (FAMLI) program, providing eligible workers with up to 12 weeks of paid leave to care for themselves or a family member with a “serious health condition.” This includes caring for parents, stepparents, spouses, domestic partners, grandparents, and other family members. FAMLI offers partial wage replacement of up to $1,000, allowing caregivers to take time off without losing their income or sacrificing their employment status.

Starting in July 2025, employees will notice payroll deductions for FAMLI, and benefits will be available the following year. This program is a financial lifeline for caregivers, offering wage support that helps balance work, caregiving, and long-term financial goals.

The FAMLI program will also help alleviate the sequence of savings risk by allowing caregivers to maintain income and continue making retirement contributions while fulfilling caregiving responsibilities. For more information, visit [Maryland’s Paid Leave website](https://paidleave.maryland.gov/workers/Pages/home.aspx).

Guiding an Improved Dementia Experience (GUIDE) Model

The Centers for Medicare & Medicaid Services launched the GUIDE Model this year. In limited areas, this new resource supports unpaid caregivers in navigating the complexities of Medicare services for older adults diagnosed with dementia.

Understanding Medicare coverage is crucial when managing the healthcare needs of a loved one with dementia, as it can help caregivers access essential services like hospital care, home health care, memory care, skilled nursing facilities, and hospice care. The model program provides detailed guidance on Medicare benefits, enrollment periods, and eligibility, making identifying coverage for cognitive assessments, memory care, and long-term care needs easier.

For more information and to explore the range of services available, visit the official Medicare website at [Medicare.gov](https://www.cms.gov/priorities/innovation/innovation-models/guide).

Maryland’s Family Caregiver Support Program

The Maryland Department of Aging administers the Maryland Family Caregiver Support program. It is a resource for family caregivers to care for older loved ones at home for as long as possible. Aging is a dynamic process that leads to new aspirations, abilities, and knowledge we can share with our communities. For more information, visit the [Maryland Department of Aging website] (https://aging.maryland.gov/Pages/national-family-caregiver-support.aspx).

The Role of Sagepoint Senior Services

Nonprofit organizations like Sagepoint Senior Services are crucial in supporting family caregivers in rural communities. Sagepoint offers professional care services, including part-time adult day care, full-time assisted living, and memory care. These services provide high-quality care for aging loved ones while enabling caregivers to maintain financial security by continuing to work.

By utilizing services like those offered by Sagepoint, caregivers can reduce the stress of caregiving while still contributing to their retirement savings and safeguarding their future financial well-being.

Conclusion: Balancing Caregiving and Retirement

Caring for an aging loved one is a rewarding but challenging responsibility, often placing significant financial strain on families. Addressing the sequence of savings risks associated with caregiving is crucial to safeguarding your long-term financial health and wellness. Developing a comprehensive financial plan, leveraging government support resources, and exploring community services like those offered by Sagepoint can help mitigate these economic risks. Finding this balance allows you to fulfill your caregiving responsibilities without compromising your future financial security.

###

Christine Parker, CFP®, APMA®, CSRIC®, is the sole practitioner and founder of Parker Financial, LLC, an independent fee-only Registered Investment Adviser based in Maryland. At Parker Financial, LLC, our Guardian Wealth Care services are designed to support high-earning professionals facing the physical, emotional, and financial complexities of family caregiving for older parents.

Christine holds multiple professional designations, including CERTIFIED FINANCIAL PLANNER™ (CFP®), Accredited Portfolio Management Advisor℠ (APMA®), and Chartered SRI Counselor℠ (CSRIC®). She is pursuing a Master of Science in Personal Financial Planning at the College for Financial Planning and a Bachelor of Science in Business Administration with a Minor in Finance from the University of Maryland University College.

In addition to her professional work, Christine has held numerous leadership roles in community organizations, including past president of the Financial Planning Association of the National Capital Area and past chair of the Sagepoint Senior Services Foundation. She is also actively involved in several other nonprofit boards and committees. Please visit Parker Financial, LLC website for more information.

Nurturing a Healthy Mind: Essential Tips for Strong Brain Health

Embrace These Seven Habits to Enhance Your Cognitive Well-Being

Maintaining strong brain health is essential for leading a fulfilling and vibrant life, especially as we age. At Sagepoint Senior Living Services, we are dedicated to promoting wellness and enriching the lives of our residents. By adopting these seven key habits, you can take proactive steps toward nurturing your cognitive well-being.

Quit Smoking: Smoking has been shown to have detrimental effects on brain health. Quitting smoking not only improves lung and heart health but also enhances cognitive function. Nicotine and other harmful chemicals in cigarettes can damage brain cells and blood vessels, leading to a higher risk of cognitive decline.
Maintain Healthy Blood Pressure Levels: High blood pressure can negatively impact brain health by increasing the risk of stroke and cognitive impairment. Regular monitoring and management of blood pressure through a balanced diet, regular exercise and prescribed medications are crucial.
Be Physically Active: Physical activity is not only beneficial for the body but also for the mind. Regular exercise has been linked to improved memory, increased brain volume and reduced risk of cognitive decline. Aim for at least 150 minutes of moderate-intensity exercise each week, such as walking, swimming or dancing.
Maintain a Healthy Weight: Maintaining a healthy weight is crucial for overall well-being, including brain health. Obesity and excess weight are associated with an increased risk of cognitive decline and dementia. A balanced diet rich in fruits, vegetables, whole grains, lean proteins and healthy fats can help you achieve and maintain a healthy weight. Incorporating portion control and mindful eating practices can further support your weight management goals.
Get Enough Sleep: Quality sleep is essential for brain health and cognitive function. During sleep, the brain undergoes processes that consolidate memories and clear out toxins. Aim for 7-9 hours of sleep each night to allow your brain to rest and rejuvenate. Establish a consistent sleep routine by going to bed and waking up at the same time each day and create a relaxing bedtime environment to promote restful sleep.
Stay Engaged in Your Community: Social engagement and meaningful connections play a significant role in maintaining brain health. Staying active in your community through volunteer work, social clubs or group activities can help keep your mind sharp and reduce the risk of cognitive decline. Engaging in conversations, learning new skills and participating in community events stimulate brain function and provide a sense of purpose and fulfillment.
Manage Blood Sugar Levels: High blood sugar levels can damage blood vessels and nerves, affecting brain health and increasing the risk of cognitive decline. Regularly monitor your blood sugar levels, especially if you have diabetes.

Maintaining strong brain health is a cornerstone of a fulfilling and independent life. By incorporating these seven habits into your daily routine, you can take proactive steps toward preserving your cognitive well-being and enjoying a vibrant, engaged lifestyle.

Navigating the Challenges of Aging: Tips for Maintaining Independence in Seniors with Dementia

As our loved ones age, the threat of diseases like Alzheimer’s and other forms of dementia looms large. With over 6 million adults affected by Alzheimer’s disease in the U.S., it’s a concern that many families face. While these conditions bring cognitive and functional challenges, there are ways to support seniors in maintaining their independence and dignity.

Early Detection and Proactive Care

Early detection of cognitive decline is crucial. Regular check-ups and discussions about memory concerns with healthcare providers can lead to early diagnosis and better care planning. Utilizing services like the Medical Annual Wellness Visit can help in assessing cognitive impairment and managing other chronic conditions.

Embracing a Healthy Lifestyle

Research shows that physical exercise, not smoking and managing other cardiovascular risks can lower the likelihood of cognitive decline. Encouraging seniors to stay active, eat a balanced diet and engage in mental exercises can significantly contribute to maintaining their cognitive health.

Creating a Safe and Supportive Environment

Adapting the living environment to suit the needs of seniors with cognitive challenges is vital. This includes safety modifications in the home to prevent falls, using reminders and labels for orientation and simplifying daily tasks to enhance their ability to perform them independently.

Strengthening Social Connections

Social engagement is an integral part of healthy aging. Encourage seniors to participate in community activities, join clubs or groups and maintain regular contact with family and friends. This social interaction can help in slowing cognitive decline and improving overall well-being.

Supporting Caregivers

Caregivers play a critical role in the lives of seniors with dementia. Programs like the Resources for Enhancing Alzheimer’s Caregiver Health (REACH) provide valuable support and education for caregivers. Caregiver health directly impacts the quality of care they can provide, making their well-being a priority.

While the journey with Alzheimer’s disease and other forms of dementia is challenging, maintaining a senior’s independence as much as possible is crucial for their dignity and quality of life. By adopting these strategies, families and caregivers can help their loved ones navigate this path with grace and support.

Mind Matter: Daily Habits for Lowering Risk of Dementia

While there is a lot that we still don’t know about dementia, it’s important to arm ourselves with the information that we do know about this disease. For our seniors and aging relatives, we want to recognize and encourage behaviors that will not only create a healthier lifestyle but also lower the risk of developing dementia.

What is dementia?
Dementia is a brain disease that affects a person’s memory or thought processes. Additionally, dementia can also affect a person’s personality, communication abilities and other mental functions of daily living. The most common form of dementia is Alzheimer’s disease.

Who is at risk?
Anyone can develop dementia, but some people may be at a higher risk than others. For example, those who are 65 years or older, certain minority groups, including Hispanic or African American adults and women tend to be at a higher risk.

What can I do to lower my risk of dementia?
There are many daily factors to focus on that can help lower your risk of dementia, including:

Managing high blood pressure – Talk to your doctor about ways to manage high blood pressure through medication and lifestyle behaviors.
Not smoking – For smokers, counseling and medication and help with quitting the habit for good.
Being physically active – Just 30 minutes of physical activity a day can have a big impact on overall well-being.
Preventing diabetes and heart disease – Talk to your doctor about your family history and risk factors for these conditions and ways to treat them with medication and lifestyle changes.

Take charge of your brain health today through small, healthy lifestyle changes. Not only can these changes make a big difference in your daily life, but they can also lower the risk of dementia, Alzheimer’s and related conditions. You can also lower your risk for other chronic conditions like diabetes, heart disease and high blood pressure.

“Reducing Risk of Alzheimer’s Disease.” Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, 13 Sept. 2022, www.cdc.gov/aging/publications/features/reducing-risk-of-alzheimers-disease/index.htm.

Qualified Charitable Distributions for Your Philanthropic Goals

It’s the time of year for giving and with our end-of-year campaign, Caring Hearts, we have the perfect opportunity for you to contribute to a cause that supports our seniors. With your contributions, we’ll raise funds to help Sagepoint Senior Living Services grow awareness of dementia and the effects it has on the person, the family and the community as a whole. To achieve this goals, we will expand community outreach efforts through caregiver support and training programs for those who care for loved ones with dementia and other long-term cognitive illnesses.

Whether you have a loved one who lives with dementia or you know someone whose life has been touched by this illness, there are many reasons to support this worthy cause. But, did you know that there are tax incentives that make charitable giving easier than ever?

With tax-free charitable giving from an IRA, seniors age 70½ or older can make tax-free charitable donations from IRAs that count toward satisfying required minimum distribution and reduce taxable income. Read more about Qualified Charitable Distribution below as you consider your end-of-year donations.

What is a Qualified Charitable Distribution (QCD)?
A QCD is a tax-free charitable distribution of funds directly from the IRA trustee (custodian) of an eligible IRA account payable to a qualified charitable organization that can receive a tax-deductible contribution. A tax-free QCD is defined in IRS Publication 17 – Your Federal Income Tax for Individuals on page 126.

Normal distribution from an IRA of deductible contributions and earning is included in income and taxed as ordinary income. The tax-free QCD removes the distribution from taxable income. QCDs are recorded on Form 1040, U.S. Individual Tax Return 2018 – the sum total QCD distribution is included on line 4 a – IRA distribution, and the abbreviation ‘QCD’ is written on line 4 b – taxable amount.

Who is Eligible to Make a tax-free QCD?
IRA account owners and beneficiaries age 70 ½ or older on the date the tax-free QCD is made to one or more qualified charitable organizations.
Taxpayers who now claim the standard deduction can still make tax-free QCDs.

What type of IRA accounts are eligible for a QCD?
Traditional IRA, Rollover IRA, Inherited IRA accounts and non-active SEP and Simple IRA accounts are eligible for a tax free QCD. Active SEP or Simple IRA account currently receiving employee or employer contributions is not eligible.

Roth IRA accounts are eligible but a tax-free QCD will not lower income tax because distributions from Roth IRAs are already tax-free and not included in income.

What type of retirement savings accounts are ineligible for a QCD?
Employer-sponsored retirement plans, such as 401(k)s, 403(b)s and 457(b)s are not eligible for tax-free QCD. A normal or tax-free QCD distribution to satisfy the IRA RMD requirement in a given tax year cannot count toward satisfying the RMD requirement for employer-sponsored requirement plans.

However, an employer-sponsored plan account owner may consider a direct transfer rollover to an IRA Rollover account that would then be eligible for tax-free QCDs. RMD calculations for tax-deferred IRAs and employer-sponsored retirement plans for the current tax year will be based upon the fair market value of the account at the close of business on December 31 of the prior year, factored by your age and life expectancy. Therefore, before implementing a rollover strategy the time and suitability should be taken into consideration.

What is the tax-free QCD distribution limit?
Seniors age 70 ½ or older may make tax-free charitable donations and exclude up to $100,000 from gross income per tax year by making tax-free QCD’s directly from an IRA. There is no carry-over from year to year. Your spouse may also make a tax-free charitable donation and exclude up to $100,000 from gross income per tax year for a combined total of $200,000.

Summary
Whether you donate to our end-of-year Caring Hearts campaign or another worthwhile cause, tax-free QCDs may be a great way to fulfill your philanthropic goals and make a lasting charitable impact in your community. Always consult your professional tax accountant, estate planning attorney and/or investment advisor before implementing any strategy.

Older Victims Have Been Losing More and More Money to Elder Fraud

Christine Parker, CFP®, Chartered SRI Counselor sm, is Managing Director of Parker Financial, LLC; an Independent Fee Only Investment Advisor in the state of Maryland. Christine currently serves as a member of the Sagepoint Senior Services Foundation Board of Officers and Directors.

It is very possible for seniors aged 60 and older to experience irreversible economic loss and great psychological distress as a result of elder abuse and elder fraud.

The term elder abuse refers to the mistreatment of seniors who are vulnerable, especially those who are physically and mentally handicapped, including abuse, neglect, or financial abuse, often perpetrated by family members, and other trusted persons. Elder fraud, on the other hand, is generally committed by strangers – criminals who use various schemes to prey on the elderly.

Fraud victimization among older adults is influenced by these 7 major factors:

Cognitive decline
Heighten emotions in decision making
Overly trusting nature
Psychological vulnerability
Social isolation
Risk-taking and
Lack of knowledge and information regarding fraud

Researchers at the Stanford Center on Longevity working in collaboration with researchers from the FINRA Investor Education Foundation and the AARP Fraud Watch Network “found that inducing emotions such as excitement and anger in older adults increased their intention to buy falsely advertised items.”

The Office of Victims of Crimes at the Department of Justice seeks to raise public awareness of the National Elder Fraud Hotline and encourage victims of fraud to reach out and report.

There are different types of fraud schemes that affect different generations. Elderly adults and their loved ones and caregivers need information about perpetrators of elder fraud schemes and knowledge about how to prevent it and report it. The main goal of elder fraud is to exploit older adults financially.

Reported Incidents of Elder Fraud and Scams

Using the FTC’s Consumer Sentinel Network database, which tracks reports of fraud, schemes, financial losses, contact methods, payment methods, and other pertinent information, we can track elder fraud trends. We can also know schemes used to perpetrate elder fraud.

Elder fraud is a serious and growing threat. According to the FTC, total reported losses have been increasing each year since 2020 as shown in the chart below:

For older adults aged 60-69, 70-79 and 80 and older, the median financial loss reported so far in 2023 is $500, $800 and $1,393.

In this time period, older adults experienced the following fraudulent schemes most frequently: business imposters, government imposters, tech support scams, online shopping, and prizes, sweepstakes, and lotteries. Online shopping, tech support scams, and sweepstakes and lotteries scams reported had higher occurrences of financial loss.

The most commonly reported payment method used by older adults who were scammed is the credit card, followed by debit cards, gift cards, reloadable cards, payments apps, bank transfers, crypto-currencies, wire transfers, and money orders. Scammers contact older adults using social media (Facebook, Instagram, etc.), websites or apps, phone calls, online ads or pop-ups, email, text, email and mail.

Investment Scams

According to FTC data, older seniors lost more money to investment schemes than to any other category in 2022 and 2023. From $1.8 billion in 2021, investment scam losses for all consumers doubled to $3.8 billion in 2022. For seniors aged 60-69, 70-79, and 80 and over, the median financial loss reported so far in 2023 is $12,841, $13,100, and $11,100, respectively.

Protecting financial accounts

In order to help protect your assets, banks, credit unions, and brokerage firms encourage you to designate a “Trusted Contact.” If the institution suspects financial exploitation or has difficulty contacting the owner, they can reach out to this person in an emergency situation to protect your assets.

Consider this and other security features offered by your financial institutions to include: reset passwords, enroll in advanced authentication (set up two-factor authentication,) and enroll in alert notification for any transactions as soon as they occur (set up security alerts).

Resource

In their website, www.aging.maryland.gov, the Maryland Department of Aging provides information about elder scams and fraud, as well as how to report it.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.

Sage Advice Community Conversation Series Begins in September

There are no easy answers when it comes to a loved one suffering from dementia. But, there are resources and tools to help you better understand this disease and feel more prepared when caring for someone with dementia.

In our newly launched Sage Advice Community Conversation Series, we aim to provide information and tools for families of those living with dementia and provide them with a greater understanding of the condition. Each series will address a specific topic related to dementia. At the events, presenters and experts will share resources and advice about a certain aspect of dementia to aid families in caring for their loved ones.

Beginning in September, we invite anyone whose family has been affected by dementia to attend to gain more support and resources. Past participants have shared, “This series fills a need in the community for more information and resources about a disease that requires comprehensive support and affects so many families.”

On September 11, the topic, “What is Dementia?” will offer a broad overview of the condition, including causes, symptoms, stages, prevention and treatment. Next, on September 25, “A Walk in their Shoes: A Dementia Experience” will offer attendees a glimpse into the daily challenges of living with dementia through participating in hands-on activities.

Don’t miss this chance to better equip yourself with information and resources as you navigate the challenging journey of a loved one living with dementia.

For more information and to get your free ticket visit the links below. Space is limited, please make sure to register to secure your spot.

Monday, September 11 | 6-7:30pm

What is Dementia?

Monday, September 25 | 6-7:30pm

The Dementia Experience

Sagepoint Senior Living Services, Adult Day Services Building

10200 La Plata Rd, La Plata, MD 20646

Supporting Sagepoint is the Greatest Gift You Can Give to Our Residents and Their Families

6 Replies

We all have special moments that live in our hearts. The first time meeting your best friend. Saying “I do.” Watching your granddaughter receive her diploma. We remember these moments because they bring us so much joy, help us stay forever young and keep us connected to loved ones passed.

These moments are magical, and they’re worth more than gold. But for too many in our community, these moments are slipping away. There are currently 13.5 million people living with dementia in the U.S. In Maryland, the number of people with Alzheimer’s disease is expected to increase by nearly 20% in the coming years.

That’s why Sagepoint Senior Living Service’s mission of growing awareness of dementia and the effects it has on the person, the family and the community as a whole is so important.

As a 501(c)(3) organization, we rely in large part on funding from government programs. Funding for these programs is shrinking, and we desperately need to make up the difference and then some.

By establishing recurring donations, you will support our work of expanding vital community outreach efforts to develop caregiver support and training programs for those who care for loved ones with dementia and other long-term cognitive illnesses.

There are many wonderful ways to contribute to Sagepoint, and we are grateful for each one. Some other options that you can consider:

Monetary Donations (Recurring or One-Time)

Online, check, cash, IRA-qualified charitable distribution, donor-advised fund grant, workplace payroll deduction

Planned Giving

Bequeath from will or trust, pledges, charitable beneficiary designation, endowment-style donor-advised fund grant, charitable remainder trust, charitable gift annuity

Lifetime Giving

Securities including stocks and bonds, real estate and other assets, volunteering

Fundraising Campaigns

Sagepoint’s Golf Tournament, End-of-Year Campaign and other future fundraising opportunities.

Our team is so thankful for all of our residents and the family members who entrust us with their care. Each one gets our full attention and our best efforts to ensure their health and safety each day.

Please consider supporting Sagepoint, our residents and their families today. Thank you.

Sage Advice: Stop the Scam

3 Replies

Every Year, Scammers Steal Hundreds of Millions from Seniors. Here Are Some Ways to Stop the Scam.

The senior population is a vulnerable group that is often targeted by scammers. In fact, in 2021, there were 92,371 senior victims of fraud, resulting in $1.7 billion in losses*, with likely more stolen in unreported incidents. As people age, they may become more trusting and less skeptical, making them more susceptible to fraud. Additionally, many senior individuals may not be as tech-savvy as younger generations, making them easier targets for online scams.

One of the most important ways of preventing seniors from being scammed is to encourage them to be cautious with their personal information. This can include things like their social security number, bank account information and other sensitive details. Scammers often try to obtain this information from seniors in order to steal their identity or money, so it’s important to stress the importance of keeping this information private.

It’s also a good idea to encourage seniors to seek help if they feel unsure about something. This can include asking a family member or friend for their opinion or even contacting local law enforcement for guidance. Many police departments have programs in place to help elderly individuals who may be vulnerable to scams, so it’s worth exploring these options.

It’s critically important to educate seniors about the types of scams that are out there. There are a variety of different schemes that scammers may try, and by educating seniors about these scams, you can help them recognize when something seems off and avoid falling victim to the scam.

Here are some of the most common scams that target seniors:

Government Impersonation Scams-Scammers call unsuspecting older adults and pretend to be from the Internal Revenue Service (IRS), Social Security Administration, or Medicare. They may say the victim has unpaid taxes and threaten arrest or deportation if they don’t pay up immediately.
Phone Scams-Criminals will call seniors and pretend to be a legitimate company or organization, asking for personal information or money.
Email Scams-Scammers will send emails to elderly individuals posing as a trustworthy source, such as a bank or government agency, asking for personal information or money.
Investment Scams-Seniors are targeted with promises of high returns on investments, only to have their money stolen from them.
Sweepstakes and Lottery Scams-Scammers will tell elderly individuals they have won a prize in a sweepstakes or lottery, but in order to claim it, they need to pay a fee or provide personal information.
Grandparent Scams-Criminals will call seniors and pretend to be their grandchild, claiming to be in trouble and in need of money.

By educating seniors, encouraging caution with personal information and seeking help when needed, you can help protect our most vulnerable community members from the harm caused by scammers.

*Waterman, July 27, 2022, The Top 5 Financial Scams Targeting Older Adults, ncoa.org

Tax-Free Charitable Giving From An IRA

5 Replies

Seniors age 70 ½ or older can make tax-free charitable donation from IRAs that count toward satisfying required minimum distribution and reduce taxable income.

What is a Qualified Charitable Distribution (QCD)?

A QCD is a tax-free charitable distribution of funds directly from the IRA trustee (custodian) of an eligible IRA account payable to a qualified charitable organization that can receive a tax-deductible contribution. A tax-free QCD is defined in IRS Publication 17 – Your Federal Income Tax for Individuals on page 126.

Who is Eligible to Make a tax-free QCD?

IRA account owners and beneficiaries age 70 ½ or older on the date the tax-free QCD is made to one or more qualified charitable organizations.
Taxpayers who now claim the standard deduction can still make tax-free QCDs.

What type of IRA accounts are eligible for a QCD?

Traditional IRA, Rollover IRA, Inherited IRA accounts and non-active SEP and Simple IRA accounts are eligible for a tax free QCD. Active SEP or Simple IRA account currently receiving employee or employer contributions is not eligible.

Roth IRA accounts are eligible but a tax-free QCD will not lower income tax because distributions from Roth IRAs are already tax-free and not included in income.

What type of retirement savings accounts are ineligible for a QCD?

Employer-sponsored retirement plans, such as 401(k)s, 403(b)s and 457(b)s are not eligible for tax-free QCD. A normal or tax-free QCD distribution to satisfy the IRA RMD requirement in a given tax year cannot count toward satisfying the RMD requirement for employer-sponsored requirement plans.

What is the tax-free QCD distribution limit?

Seniors age 70 ½ or older may make tax-free charitable donations and exclude up to $100,000 from gross income per tax year by making tax-free QCD’s directly from an IRA. There is no carry-over from year to year. Your spouse may also make a tax-free charitable donation and exclude up to $100,000 from gross income per tax year for a combined total of $200,000.

Does a tax-free QCD distribution count towards Requirement Minimum Distribution (RMD)?

Yes. A tax-free QCD may be an appropriate strategy for individuals who are charitable inclined and do not need RMDs for living expenses. A tax-free QCD can potentially reduce income tax liability on RMDs to zero. A tax-free QCD can be counted toward satisfying your RMD requirements for IRA accounts.

Here is an example of a normal IRA distribution of $5,000 at ordinary income tax rates:
22% 24% 32% 35% 37%

	22%	24%	32%	35%	37%
IRA Distribution	$5,000	$5,000	$5,000	$5,000	$5,000
Income tax	1,100	1,200	1,600	1,750	1,850
Net Distribution	3,900	3,800	3,400	3,250	3,150

Assume you are in the 24 percent income tax bracket – you make a tax-free QCD of $5,000 to count towards satisfying your RMD requirement, provide an income tax break of $1,200, lower taxable income, and help fulfil your philanthropic goals.

The annual RMD must be calculated by you or your custodian for each IRA account, but the sum RMD may be aggregated and distributed from one or more IRA accounts. Note – RMD for employer sponsored retirement accounts cannot be aggregated and distributed from IRAs.

The first distributions from an IRA are consider to satisfy the annual IRA RMD requirement. If you have already taken a portion of your RMD requirement earlier this year, you may consider a tax-free QCD for the remaining balance of the RMD requirement that needs to be distributed before the year-end deadline. The only exception to the year-end RMD requirement deadline is in the first year an IRA account owner turns age 70 ½.

What charities qualify to receive a tax-free QCD?

As defined by IRS Publication 590-B Distributions from Individual Retirement Arrangements (IRAs,) a charity eligible to receive a QCD is a “qualified 501(c)(3) organization (a charitable organization eligible to receive tax-deductible contributions.)” Donor advised funds and private foundations are not eligible to receive tax-free QCDs. Upon request a charity can provide you their IRS issued ‘Letter of Determination’ verifying tax-exempt status. Additionally, please find information about a tax-exempt organization’s federal tax filing status on the IRS web site at www.irs.gov.

How to set up direct payment to the charitable organization?

To make a tax-free QCD, there must be direct payment by the IRA trustee (custodian) on behalf of the IRA account owner to the charitable organization. You may call your IRA trustee (custodian) and request a check made payable to a charitable organization and delivered to you so that you may forward to the charity. (IRS Notice 2007-7, Q&A-41). Consider including a ‘Letter of Intent’ with the check to describe your wishes and purpose of the charitable gift. Check with you IRA trustee (custodian) for year-end processing deadlines for issuing checks. As normal, you will need to keep records to include written acknowledge from the charitable organization for your tax-exempt charitable donation.

What are key benefits of lowering taxable income, Adjusted Gross Income (AGI) for seniors?

A tax-free QCD can count towards satisfying your RMD requirement but does not add to your taxable income, AGI. You may benefit from lowering your taxable income to lower Medicare Part B premium and prescription drug premium for high income earners, lower taxable percentage of Social Security benefits, and larger deductions for medical expenses; among other benefits.

Medicare Premium for High Income Beneficiaries – Potential lower AGI to qualify for lower income threshold to lower income related monthly adjustment amounts for Medicare Part B and Prescription Drugs premiums. For more information, please view Social Security Administration publication – Medicare Premiums: Rules for Higher-Income Beneficiaries.

Itemized Deduction for Medical Expense – Potential lower AGI to reduce threshold for claiming unreimbursed medical and dental expenses you paid. The Tax Cuts and Jobs Act of 2017 (TCJA) lowered the AGI threshold for medical expenses from 10 percent to 7.5 percent for 2017 and 2018 for all taxpayers and reverts back to 10 percent in 2019.

Percentage of Social Security Benefits to be Taxed – Potential lower ‘combined income’ to qualify for a lesser portion of your Social Security benefits to be taxed. For more information, please visit Social Security Administration web page – Benefits Planner | Income Taxes and Your Social Security Benefits.

Summary

Tax-free QCDs may be an effective strategy to fulfill your philanthropic goals and make a lasting charitable impact in your community. Before implementing any strategy, please consult your professional tax accountant, estate planning attorney and/or investment adviser.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Any investments and strategies mentioned here may not be suitable for everyone. While every attempt is made to provide accurate information, we cannot guarantee the accuracy and completeness of this content. Christine does not provide legal or tax advice.

Written by Christine Parker, CPF®, president of Parker Financial, LLC and member of Sagepoint Senior Services Foundation Board of Officers and Directors.