Sharing the Excess

David Gartland

ANDREW CARNEGIE emigrated from Scotland as a boy, began working at a young age in a telegraph office, and eventually started Carnegie Steel. When J.P. Morgan bought the company, Carnegie found himself with a lot of time on his hands—and a lot of money.

Obviously, he was wealthy, with homes in both the U.S. and Scotland. But it’s what he did with his money that always intrigued me: He gave it away. Instead of building monuments to himself, he started public libraries, universities and music halls to benefit others.

Carnegie wasn’t just intelligent. He also had street smarts. According to Dale Carnegie—no relation of Andrew—he was a master of human relations. The combination allowed him to advance in jobs that he held, plus make the necessary connections in business to succeed. I always believe smart people will figure it out, whatever “it” is. Andrew Carnegie was no exception.

I’d like to think I am one of those smart guys, but I’m not. My approach is to avoid costly mistakes rather than make brilliant financial moves.

In 2024, I’ll turn age 73—the golden age when required minimum distributions (RMDs) must begin. I’ve been blessed, such that I haven’t so far had to withdraw money from my IRA to live on. But with RMDs, withdrawals will indeed begin.

I could make the required withdrawal, pay the taxes and invest the balance in my regular taxable account. This would increase my taxable income for 2024, which—in turn—would increase how much I pay in Medicare premiums.

Inspired by Andrew Carnegie’s example, I’m thinking of sidestepping taxes on my RMD by making a qualified charitable distribution (QCD). This would involve notifying my IRA provider and asking the firm to cut a check in the name of the charity I want to support. I’d then need to mail the check myself.

The QCD limit in 2024 is $105,000. If your RMD is less than that amount, you could potentially donate your entire RMD to charity and avoid all income tax on the withdrawal. Another advantage: The withdrawal won’t impact the Medicare premium you pay. Any downsides? You can’t list the donation on your tax return as an itemized deduction.

I regularly donate 10% of my income to our church. In 2024, I plan to use my QCD to pay what I’d normally pay with after-tax dollars. I previously didn’t get any tax benefit for donating to the church, because I don’t itemize deductions on my tax return, but now I’ll get the tax benefit offered by QCDs.

Having enough for your needs and wants puts you in the position of having to decide what to do with the excess. That’s the decision that RMDs are forcing me to make. My plan for 2024: I’m going to imitate Andrew Carnegie and see if giving to charity will make me happy.

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