IRA Charitable Gift Annuity Strategy Lets Retirees Support Causes and Earn Lifetime Income

The IRA charitable gift annuity strategy is gaining attention as a smart way for retirees to combine generosity with personal financial benefits. Most retirees who give to charity simply write a check, often unaware that their IRA could be used to support meaningful causes while also generating income for life. A new approach highlighted by Charles Schwab is changing the conversation, showing how retirees can do both at once.

Key Highlights at a Glance

The SECURE 2.0 Act allows IRA owners who are 70½ or older to fund charitable gift annuities, also known as CGAs. These IRA-funded CGAs provide fixed lifetime income along with valuable tax advantages, although they come with strict limits. Industry experts agree that many retirees still lack awareness about these tax-smart strategies, leaving a major opportunity untapped.

A New Way to Give and Receive

Charles Schwab recently outlined how the SECURE 2.0 Act lets eligible IRA owners convert pretax retirement dollars into a charitable gift annuity. In simple terms, this arrangement allows retirees to support a qualified nonprofit while also receiving fixed income payments for the rest of their lives.

What makes this option even more attractive is the current state of CGA payout rates, which have reached their highest levels in more than a decade. As a result, this strategy has become increasingly appealing to retirees who want to balance financial security with philanthropy.

A study by Fidelity Charitable found that 78 percent of retirees and pre-retirees consider charitable giving an important part of their lives. However, only 32 percent are aware that they can donate appreciated assets like stocks, highlighting a major knowledge gap that could prevent many people from making the most of their giving potential.

How SECURE 2.0 Changes the Game

Before the SECURE 2.0 Act came into effect in 2023, qualified charitable distributions, or QCDs, from IRAs could only be sent directly to nonprofits, and donors received no financial return. The new law has changed that significantly.

Now, IRA owners aged 70½ or older can make a once-in-a-lifetime QCD of up to $54,000 in 2025 to one or more charitable gift annuities. According to Schwab’s recent guidance, the distribution moves directly from the IRA custodian to a 501(c)(3) charity, which then issues a lifetime income contract to the donor.

This contribution counts against the annual QCD limit, which is $108,000 in 2025 and is set to rise to $111,000 in 2026, based on IRS Notice 2025-67. The amount can also fulfill some or all of the required minimum distribution under IRC §408(d)(8), making it an even more powerful tool for retirees managing their tax obligations.

Why Experts Are Praising This Strategy

Amy Pirozzolo, who serves as head of donor engagement at Fidelity Charitable, believes this approach reflects a major shift in how retirees can contribute to their favorite causes. She explained that retirement opens the door to spending more time and resources on meaningful causes, but added that many donors lack awareness about the tax-smart strategies that can make their giving more effective.

Sarah Brenner, JD, who serves as director of retirement education at Ed Slott & Co., also pointed out the practical advantages of this strategy. She noted that many IRA owners are drawn to it because charities already offer CGAs, which can now be funded using pretax retirement dollars. Brenner added that charitable remainder trusts often involve higher setup and administration costs, which rarely make sense for the limited QCD amount allowed.

CGA Payout Rates Reach 16-Year Highs

The financial appeal of charitable gift annuities has grown substantially in recent years, mostly due to rising interest rates set by the Federal Reserve since 2022. The American Council on Gift Annuities, which sets recommended payout rates, increased its suggested rates by roughly 0.4 percentage points in January 2024 and confirmed those rates would remain in place through 2025.

This increase has made CGAs more attractive than they have been in nearly two decades, providing retirees with stronger income potential alongside their charitable contributions.

How CGA Payouts Look Across Different Ages

The amount of income a donor can receive from a CGA depends largely on their age, as older donors typically receive higher payout rates due to shorter life expectancy calculations.

A 70-year-old donor can expect a suggested maximum single-life payout rate of about 6.3 percent based on current ACGA rate schedules. A 75-year-old donor would receive a payout rate of roughly 7.0 percent, meaning a $50,000 gift could generate about $3,500 in fixed annual income for life. An 85-year-old donor could earn about 9.1 percent, reflecting the higher payout structure designed for older retirees.

These payout examples make it clear why this strategy has become increasingly popular for retirees looking to lock in steady income while doing good in their communities.

Why More Retirees Should Consider This Option

For retirees who already plan to give to charity, the IRA charitable gift annuity offers a powerful way to do more with the same amount of money. Instead of simply writing a check or transferring stocks, retirees can use their IRA to fund a CGA, support their favorite cause, and enjoy guaranteed income for life. The arrangement also helps reduce taxable income, which can be especially helpful for those looking to manage required minimum distributions.

Beyond the financial advantages, this strategy gives retirees a sense of long-term impact. The funds support charitable missions while also providing peace of mind through reliable income that lasts a lifetime.

The Importance of Working With a Financial Advisor

Despite the clear advantages, this strategy involves specific rules, contribution limits, and tax considerations that require careful planning. Working with a financial advisor or tax professional can help retirees determine whether an IRA-funded charitable gift annuity is the right choice for their personal situation.

Advisors can also help donors choose qualified charities, calculate expected income, and ensure the contributions meet IRS requirements. With the rules around QCDs and CGAs becoming more flexible, professional guidance has never been more valuable.

Final Thoughts

The IRA charitable gift annuity strategy represents one of the most exciting financial planning tools available to retirees today. With high payout rates, expanded SECURE 2.0 benefits, and growing public interest in charitable giving, more retirees than ever can use their IRAs to support important causes while securing steady income for life. For those approaching retirement or already enjoying it, exploring this option could lead to a more fulfilling and financially rewarding next chapter.