Making the Most of Your Giving in Retirement

A Look at Qualified Charitable Distributions and Donor-Advised Funds

At a recent meeting, our group had a thoughtful discussion about generosity and charitable giving in retirement. The scripture we reviewed comes from 1 Timothy 6:17-19 ESV, which in part notes, we “are to be rich in good works, to be generous and ready to share.”

We then explored practical methods to practice generosity through two tools: Qualified Charitable Distributions (QCDs) and Donor-Advised Funds (DAFs).

Both offer ways to give more intentionally and, in many cases, more effectively. However, they function differently, and understanding how each fits into your situation can greatly influence not only your taxes but also your approach to generosity at this stage of life.

What follows is a straightforward overview of both options, along with some practical insights from our group’s experience.

Giving Directly from Your IRA: Qualified Charitable Distributions

For those of us in our early 70s, Qualified Charitable Distributions are one of the easiest ways to give. A QCD allows you to send money directly from your IRA to a qualified charity. Since the funds go straight to the organization, that amount isn't considered taxable income.

That can be especially useful once Required Minimum Distributions (RMDs) start. Instead of taking a distribution, paying taxes on it, and then making a charitable gift, the QCD lets you meet that requirement more efficiently. The gift counts toward your RMD, but it does not increase your taxable income.

Another benefit is simplicity. Even if you take the standard deduction, you still get the tax advantage of the QCD. There’s no need to itemize, and no extra paperwork beyond ensuring the funds are sent directly from the IRA custodian to the charity.

There are a few rules to keep in mind. You must be at least 70½ years old when making the gift, and the annual limit is $100,000 per person. The funds need to go to a qualified 501(c)(3) organization, and you’ll require the usual acknowledgment from the charity. One important point from our discussion is that QCDs cannot be directed into a donor-advised fund; they must be sent directly to the charity.

For some retirees, QCDs become a natural rhythm—simple, direct, and aligned with the donations we’re already taking.

A More Flexible Approach: Donor-Advised Funds

While QCDs emphasize simplicity, donor-advised funds offer more flexibility. A DAF is a charitable account set up through a sponsoring nonprofit organization. You make a contribution—cash, stock, or other assets—and get a tax deduction for that year. The funds are then invested in the account, and over time, you direct grants to the charities you want to support.

Several members of our group have used DAFs for years, and one consistent observation is how much easier they make the administrative side of giving. Instead of managing multiple donations, receipts, and transactions, everything flows through a single account. DAFs can also be especially helpful when donating appreciated assets. Instead of selling an investment and paying capital gains taxes, you can contribute it directly to the fund. The full value goes into the account, and the proceeds can then be distributed to charities over time.

Another practical benefit is timing. Some of our group members have adopted a pattern of “bundling” their giving by contributing multiple years’ worth of donations into a DAF in one year when they itemize deductions, then taking the standard deduction in other years. Meanwhile, they continue to support their favorite charities steadily from the fund.

It’s important to remember that once assets are placed into a DAF, they are no longer yours. The sponsoring organization has legal control, even though you keep advisory privileges. There are also some restrictions on where the funds can go, and most DAFs charge modest fees or require minimum contributions.

Still, for many, the combination of flexibility, tax efficiency, and simplicity makes DAFs a key part of their giving strategy.

How These Tools Fit Together

One of the most helpful insights from our discussion was that this is not an either-or decision. QCDs and DAFs serve different purposes.

QCDs tend to work well for simple, ongoing giving, especially once RMDs start. DAFs are often more helpful when you want to contribute larger sums, donate appreciated assets, or manage your giving over time. Some in our group use both. It might not always be perfectly optimized for tax purposes, but it shows something more important: a desire to give thoughtfully and generously.

A Final Thought

While these tools are useful, they are simply tools. They can improve our efficiency and organization. But they are not the core of the issue. The true opportunity in retirement isn't just managing our resources well, but using them in ways that reflect what matters most to us—our faith, values, and the people and causes we cherish. These strategies can assist. However, the ultimate goal is to be a faithful steward of the blessings we've received.