 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
|
Money under the Mattress
(Part of a series of articles on charitable giving and the Union County Foundation
by David Vollrath - Executive Director)
Approximately $2,000,000,000,000 (trillion) is currently on deposit within money market funds on behalf of America’s
investors and savers. Many people like you and me appropriately retain liquid "rainy day" funds within
money market funds. It is indeed prudent to have such funds readily available in the event of financial emergencies
such as loss of job or medical contingencies.
Having said that, some would argue that investing extra dollars in money market funds is the equivalent of stuffing
money under the mattress. The argument is this: the current national average yield on general-purpose money market
funds is .38%. After taxes this yield is reduced further to less than .28% for many taxpayers. Last year inflation
was approximately 1%. If you subtract the 1% inflation rate from the .28% net return you quickly see that the typical
money market fund actually has lost .72% purchasing power in the last year.
So what might investors do with the $2 trillion currently sitting in money market funds? Certificates of deposit
might be a good alternative. Even one yr. CD’s paying 1-2% provide a better return then money market funds and
if necessary you can always withdrawal the money at a reduced interest rate. Three to five year CD’s can increase
your gross yield further to as much as 3-4%.
Senior citizens might want to consider a charitable gift annuity as an alternative. For persons over age 75 the
charitable gift annuity will pay 7-10% depending on age. The older the person is on the date of funding the charitable
gift annuity the higher the annuity payout. A charitable gift annuity returns fixed income to the donor while providing
a substantial charitable gift deduction on the original funding. Also much of the fixed payment received by the
donor is tax-free. Perhaps best of all is the fact that your favorite charity (or charities) will ultimately benefit.
All things considered, with the guidance of your financial advisor, you might well determine that a charitable
gift annuity is a good alternative for some of your current money market fund assets.
The Union County Foundation is equipped to help you achieve your charitable goals by providing as a free service
pertinent information, charitable life income plans, and assistance with planned giving and estate planning. Please
call us at 937-642-9618, email us at info@UnionCountyFoundation.org, or stop by our Marysville office at 126 N. Main St. We are committed to helping you…. "preserve
your footprint in time." |
|
