Planning is the process of deciding on and arranging for something in advance.  But a particular difficulty in planning for retirement is knowing definitively what you’re planning for. . . how much will you need? When will you need it? What if you have unexpected expenses? What if you work longer than expected and/or don’t want additional income to kick in when you thought you might?

Given these unknowns, a key to good planning is diversity, not having all one’s eggs in one basket, so to speak.  A deferred charitable gift annuity provides some interesting options to incorporate into your retirement basket. 

A charitable gift annuity is a contract between an individual or couple (the donor/s) and Bates College. In exchange for the individual’s contribution, Bates promises to make fixed payments for life to one or two annuitants (most commonly the donor/s, though it does not have to be). The amount paid is based on the age of the annuitant/s. Bates College invests and manages the contribution, and when the last annuitant has passed away, it uses the remainder of the contribution for its charitable purposes.

With an immediate payment annuity, the payments begin shortly after the contribution is made, usually within the year, depending on the frequency of payments chosen.  With a deferred annuity, the start of payments is delayed at least one year.  The longer the delay, the higher the annuity rate. 

For example, an individual who contributes for an immediate annuity at age 60 would receive an annuity rate of [4.7%] for the rest of his life.  If that individual makes the contribution at age 60, but defers receipt of payments for one year, the annuity rate would be [4.9%].  However, if payments are deferred for five years, the annuity rate would be [6.1%].

With a deferred gift annuity, payments are set to begin at a fixed date in time.  When that date arrives, the payments start and continue on for the remainder of the annuitant’s life in accordance with the annuity rate.  However, there are variations on a deferred annuity that can provide flexibility in addressing some of the questions noted above.  One such variation provides the annuitant the ability to set up a range of potential start dates for the annuity, rather than having to decide on the start date at the time the annuity is established.  The later the payments are started, the larger they will be.  This flexibility can help avoid payments commencing at a time when you do not need the additional income but allow for starting a larger payment when it is needed.

To see how these deferred gift annuity options would work in your situation, you can make use of our gift calculator.

Learn more about deferred gift annuities