Flexible Gift Annuities For Baby Boomers

The aging of America’s baby boomers is creating unprecedented demographic and financial challenges. With 10,000 individuals turning 65 daily until 2030, this "gray tsunami" brings increased longevity, as a typical 65-year-old couple has a 50% chance of one spouse reaching 90. However, the shift from defined benefit pensions to defined contribution plans like 401(k)s has heightened the "longevity threat"—the risk of outliving retirement savings. Retirees relying on such plans may deplete their wealth faster than previous generations, requiring innovative strategies to sustain income and avoid financial insecurity.

Flexible charitable gift annuities offer a promising solution to mitigate these risks. These annuities allow clients to make a charitable gift in exchange for lifetime income, with the flexibility to choose a start date for payments within a specified range. This deferral increases the payout rate, while the donor receives immediate tax benefits. Depending on funding sources, such as cash or appreciated assets, the annuity provides a mix of tax-free, ordinary income, and capital gains. This structure ensures stable income, lessens reliance on market-sensitive retirement accounts, and offsets required minimum distributions' impact on retirees' assets.

For charitably inclined retirees, these annuities provide a dual benefit: financial security and the ability to give back confidently. With 73% of retirees expressing concerns about outliving their savings, many hesitate to draw down assets for charitable contributions. Flexible gift annuities address this by providing a guaranteed income stream, empowering retirees to support causes they care about while maintaining their financial independence. As retirement planning evolves, these tools can help baby boomers navigate longevity challenges and achieve a fulfilling, balanced retirement.

For more information see Kara Morin "Flexible Gift Annuities For Baby Boomers" Financial Advisor, November 1, 2024.