Counting God’s blessings: Benefits of contributing to an IRA


By Sister Laura Goedken

Over $3 trillion is invested in IRAs (individual retirement plans). Contributions are made to the IRA over the working years of an individual. These contributions are tax free and the balance in the IRA grows tax free. This income must be taxed sometime unless you use it to make a gift to a qualified charity in the correct manner!

Sr. Goedken

In most instances, when an individual takes distribution before the age of 59 ½, there is a penalty. Between ages 59 ½ and 70 ½ there is no penalty for withdrawal but these payments are taxed as ordinary income. After age 70 ½ payments are required and, again, they are treated as ordinary income. Consider making a gift to a qualified charity annually from your IRA.

Since 2006 the Federal government has allowed a gift from an IRA to go to a qualified charity tax free for anyone 70 ½ and older. This legislation could be passed again toward the end of the calendar year and it could also be made permanent. If this does not happen a gift to a qualified charity is taxed as ordinary income.


The Required Minimum Distribution (RMD) increases with age and growth in the IRA continues. Most often by time the individual reaches his/her mid 80s, payouts tend to be greater and growth slows. Often the RMD puts an individual in a higher tax bracket. Avoiding a higher tax bracket requires careful planning in prior years.

IRAs need to have a designated beneficiary. A spouse, children and grandchildren can be named as a beneficiary in a will. This requires careful gift planning. All payouts are treated as ordinary income and this sometimes puts an individual in a higher tax bracket. IRA distribution has many rules; gift planning is of utmost importance.

It can be smart planning to name a charity as the beneficiary. When the IRA becomes part of the estate of the deceased, there can be estate taxes. Gifting the IRA to relatives can become a tax burden. Consider naming the Catholic Foundation, your parish and/or a Catholic school as your IRA beneficiary.

For more information contact Sister Laura Goedken, OP, at or (563) 888-4252.

Support The Catholic Messenger’s mission to inform, educate and inspire the faithful of the Diocese of Davenport – and beyond! Subscribe to the print and/or e-edition, or make a one-time donation, today!

Print Friendly, PDF & Email
Posted on