Climbing the Gift Annuity Ladder
Back when CD interest rates were higher, it became popular for investors to purchase new CDs every six months, with maturity dates ranging from six months to as long as five years. The idea was to maximize overall interest payments by blending long-term and short-term rates.
Unfortunately, “laddering” CDs hasn’t worked so well in today’s low interest rate environment. Charitable gift annuities, on the other hand, can offer friends a form of laddering that ensures higher payouts and personal satisfaction, as well. Here is an example:
When Ruth turned 76 in 2012, she contributed $10,000 for a gift annuity that pays her $600 (6%) a year for her life. Last month she established another $10,000 gift annuity, and, because she’s a year older, we will pay her $620 annually. At current payout rates, if she continues this giving pattern, her payments from “laddered” gift annuities would be as follows:
Year |
Gift |
Age |
Payout |
2012 |
$10,000 |
76 |
$600 (6.0%) |
2013 |
10,000 |
77 |
620 (6.2%) |
2014 |
10,000 |
78 |
640 (6.4%) |
2015 |
10,000 |
79 |
660 (6.6%) |
2016 |
10,000 |
80 |
680 (6.8%) |
Total |
$50,000 |
|
$3,200 (6.4% average) |
Ruth also will receive substantial charitable deductions and her annual payments will be about 80% tax free during her life expectancy.
Please contact us for more information.
The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.
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