Many people who have already contributed the maximum to their employer-sponsored retirement plan or IRA look for additional ways to generate retirement income. For those who are also interested in giving to Indiana University, deferred gift annuities can provide a solution—they allow individuals to make a gift while securing fixed annual payments to themselves and/or another beneficiary for life, beginning at a specified future date.
A charitable solution to increasing retirement income
Is it right for you?
A deferred gift annuity may be appropriate when you want to:
- Receive more during retirement than employer-sponsored plans or IRAs allow
- Make a gift to IU and receive payments in return
- Enjoy secure payments that won’t fluctuate during your lifetime
- Convert appreciated property to retirement income while limiting capital gains taxes
Find out how you can support Indiana University while supplementing qualified retirement income with a deferred gift annuity.
Contact us to request an illustration of the financial and tax benefits you can expect (without any obligation whatsoever).
Let’s look at Angela, a longtime supporter of IU.* She is thinking more about retirement now, and she dutifully contributes the maximum to her company’s 401(a) plan. In fact, since she just turned 50 this year, she can make additional catch-up contributions. Though she would like to do more to support our work, she feels (like so many her age) that she can’t make a meaningful contribution without jeopardizing her financial needs in retirement.
After talking with her advisors and our development team, she is pleased to find that a deferred gift annuity might be a good fit for her. It will allow her to:
- Increase her philanthropic support
- Add to her retirement income
- Qualify for a current income tax deduction
In fact, by deferring her income payments, Angela will receive more income each year and a larger charitable income tax deduction if she itemizes. These two features make deferred gift annuities attractive to workers who want to accumulate additional sources of tax-favored retirement income to supplement retirement plan savings (which are subject to IRS limitations).
Spreading out deductions
Some people choose to purchase several deferred gift annuities. In Angela’s case, she establishes a $10,000 gift annuity each year for a period of 10 years. Instead of receiving payments immediately, she defers all payments to age 70—the age she plans to retire. By deferring payments, she creates larger charitable income tax deductions, and can enjoy those deductions each year for 10 years. Angela is also pleased that she can increase her support of IU while making her financial future more secure.
All examples are for illustrative purposes only. Examples are based on an AFR of 5.8% and an annual payout.
Angela accomplishes a number of things with this unique gift plan:
- Over time, she qualifies for total charitable income tax deductions that save her thousands of dollars in federal income taxes if she itemizes.
- When payments begin at age 70, Angela will receive fixed annual payments for the rest of her life. A significant portion of each payment will be income tax free until Angela reaches her life expectancy (and taxable thereafter).
- The annual payments will supplement her other savings and will ensure a more secure retirement.
- Equally important, she fulfills her wish to leave a legacy of giving that makes a positive impact at Indiana University.
Increasing flexibility
With a flexible deferred gift annuity, you can decide later when to begin receiving payments (within a predetermined time frame). While your deduction is smaller (based on the earliest possible start date), each year you continue to defer payments your annuity rate gets higher. Payments will start automatically at the end of the stated time frame if you haven’t already asked for them to begin.
This added flexibility is particularly useful to those who haven’t yet chosen a retirement date or expect to face a future expense without clear timing (such as paying for a relative’s expected nursing home care). It’s also helpful if you want to lock in a higher annuity rate (by deferring a longer amount of time) but might need to start receiving income payments earlier.
Consider the benefits

No contribution limits. Unlike IRAs and employer-sponsored retirement plans, a deferred gift annuity has no annual contribution limits. However, your deductions cannot exceed applicable limitations based on your adjusted gross income. Any excess amount can be carried forward for up to five years after the year of the gift.
Flexibility. You can fund a gift annuity with cash or other assets (often, appreciated property held for longer than 12 months). You can select the frequency of payments (quarterly, semiannually or annually) and the start date. If you want, you can even set up a two-life deferred gift annuity for spouses.
Favorably taxed payments. Part of each annuity payment is free of income tax until the annuitant reaches life expectancy (which is measured at the time of the gift). A gift annuity funded with cash will enjoy a significant tax-free component.
Multiple tax savings. In addition to receiving an income tax deduction in the year you make the gift, you can also reduce capital gains tax liability when funding a deferred annuity with long-term appreciated property.
Personal satisfaction. You can enjoy knowing that you have made a significant contribution to further our mission at Indiana University.