The “Double Benefit” of Qualified Charitable Distributions

One of the less talked about tax strategies available to retirees is also one of the most effective: the Qualified Charitable Distribution, or QCD. While it doesn’t get as much attention as Roth conversions or tax-loss harvesting, it can be a remarkably efficient way to give to a charity, especially for retirees who are already charitably inclined.

A QCD allows individuals age 70½ or older to transfer money directly from an IRA to a qualified charity. The key word is directly. When the funds go straight from the IRA custodian to the charity, the distribution does not count as taxable income, even though it goes toward satisfying your Required Minimum Distribution (RMD) once you reach RMD age.

Why does this matter? Because reducing your Adjusted Gross Income (AGI) can have multiple effects across your tax return. A lower AGI may reduce the taxation of Social Security, help avoid certain Medicare premium surcharges (IRMAA), and limit exposure to other income-based phaseouts. In other words, the tax benefit often goes beyond the charitable gift itself.

There is another subtle advantage. Many retirees take the standard deduction and therefore receive no tax benefit from writing checks to charity. A QCD effectively restores that tax benefit because the donation is excluded from income in the first place. For charitably minded retirees with IRA assets, this can be one of the most tax-efficient ways to give.

If you are considering a QCD here are a few quick rules that are worth remembering. You must be at least age 70½, the funds must come from an IRA (not a 401(k) unless it is rolled into an IRA), and the distribution must go directly to a qualified charity. The annual limit is $111,000 per person in 2026 (indexed for inflation), and married couples with separate IRAs can each make their own QCD.

In a world where tax planning often involves complex strategies and projections, the QCD stands out for its simplicity. For retirees who regularly support charities, it is one of those rare planning opportunities where doing good and doing smart tax planning happen at the same time.

In words commonly attributed to Winston Churchill: “We make a living by what we get, but we make a life by what we give.”

Fun Fact: I hope you’ve adjusted to Daylight Savings Time. It’s nice to see the sun after work! Did you know that light has always been a factor? The general idea may have been started by Benjamin Franklin, who thought that if people got up earlier to use morning sunlight, they would save on candle wax.

What to Know About Estimated Taxes

Background: U.S. tax law requires taxes to be paid on time. Wages are never a problem, because employers are required to withhold taxes out of each paycheck and send the tax directly to the IRS. But some taxable income is not subject to required withholding and therein lies the problem. If nothing is withheld, the IRS then requires the taxpayer to square up taxes quarterly. Someone who fully intends to pay the tax but thinks they can wait until the end of year and pay it all at once will get hit with a late payment penalty – with interest. According to Laura Saunders (no relation) of the Wall Street Journal, the IRS took in over $1.3 billion in tax penalties in 2024. Moving from working – where your employer is responsible – to retirement – where you are responsible – can trigger this issue.

Strategies to Avoid the Penalty:

1. Pay taxes as income comes in. You can go to the IRS website and make a tax payment at any time. If you have a quarter with income that had no withholding (self-employment, investment gains, capital gains or IRA distributions), consider getting online to make a tax payment.
2. Consider the “Safe-Harbor” rules. There are two basic “Safe-Harbor” approaches you can use when paying quarterly, estimated taxes:

• The IRS will give you a break if you pay at least 90% of your total tax for the year via withholding. So even if you misjudge a bit, you can avoid the penalty.
• If you think it will be hard to gauge income each month or quarter, you can pay based on last year’s taxes in four quarterly installments this year, and you will also avoid a penalty even if you were off. If your AGI is $150,000 or less, then you must pay 100% of last year’s tax over the four quarters. This safe harbor is 110% of last year’s taxes if your AGI is over $150,000. NOTE: You still have to spread it over 4 quarterly payments. Waiting until the end of the year will trigger the penalty.

3. Utilize the withholding “assumption.” When you have taxes withheld from a taxable withdrawal, the IRS assumes that the withholding was timely and paid equally over 12 months, even when it wasn’t. For example, if you make a large taxable IRA distribution in the 4^th quarter and you have a good handle on what your total taxable income will be for the year, just make sure your withholding on the IRA distribution gets you to the 90% safe harbor number described above and you should avoid a penalty.

Estimated taxes are yet another reason I believe a good tax preparer is worth his or her weight in gold. There are just too many ways to get caught in the estimated tax penalty trap.

Fun Fact: I am taking my winter break in Florida this week, along with my wife and my daughter…er dog, Ava. We’ve done the two-day drive to Florida several times now and Ava knows when we are getting close to the hotel after the first day of travel. She also seems to recognize certain food stops. Dogs can remember routes and specific locations though scent, visual landmarks and spatial memory. None of that explains why she was wearing sunglasses when we passed the Georgia/Florida border though.

Climbing the Wall of Worry

“The stock market is a device for transferring money from the impatient to the patient.” — Warren Buffett

I worked from home last Friday. Unfortunately, that means I had free reign of the coffee pot and could take in the big tariff news, one sip at a time (I will not confess as to how many cups I can drink if left to my own devices). If you read the headlines alone, you might wonder how markets are holding up at all. Added to the Supreme Court strike down of tariffs, there is also inflation concerns, election noise, global conflicts (Iran), cartel battles and government debt — it’s a steady drumbeat of uncertainty. And yet, markets continue to push forward. This is something investors have seen before. Markets have a long history of climbing what’s often called a “wall of worry.”

For those in or near retirement, this can feel especially unsettling. When you’re drawing income — or preparing to — volatility feels personal. The instinct to wait for clarity is completely understandable. But markets rarely reward waiting for things to feel safe. By the time the news sounds reassuring, prices have usually already adjusted.

What’s important to remember is that markets move over the short term based on expectations, not headlines. Much of today’s concern is already reflected in prices. The future doesn’t have to be perfect for markets to rise — it simply has to be better than feared. Businesses adapt. Earnings adjust. Innovation continues quietly in the background, even when the news cycle feels heavy.

For retirement-focused investors, this is where discipline matters most. A well-structured portfolio is designed not for perfect conditions, but for imperfect ones. Income planning, diversification, and appropriate reserves are meant to allow you to stay invested without reacting emotionally to every headline. The goal isn’t to eliminate worry — that’s impossible. The goal is to keep it from driving decisions.

The wall of worry isn’t a flaw in the system; it’s part of how long-term returns are earned. Patience, especially in retirement, is less about optimism and more about structure and preparation.

Fun Fact: The old story about the Chinese bamboo tree is a powerful metaphor of patience: For five years after it is planted, nothing visible seems to happen. Water it, fertilize it, care for it — still nothing breaks through the soil. But underground, an extensive root system is forming. Then in the fifth year, the bamboo can grow several feet in just a few weeks. The growth didn’t suddenly begin — it was happening quietly all along.