NYS Retiree Medicare Part B and IRMAA Reimbursement Process Explained

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

For individuals who retire from New York State service, the retiree health benefits are among the most generous in the country. One of the most valuable — and often misunderstood — features is how Medicare Part B premiums and IRMAA surcharges are reimbursed after age 65.

This article explains, in plain language:

• How New York State automatically reimburses retirees for Medicare Part B premiums

• How IRMAA (Income-Related Monthly Adjustment Amount) works and why higher earners pay more

• The manual process required to get reimbursed for IRMAA

• How far back you can go to reclaim missed IRMAA reimbursements

• What retirees (and spouses) need to do each year to stay reimbursed

How Does New York State Reimburse Retirees for Medicare Part B Premiums?

Once a New York State retiree reaches age 65 and enrolls in Medicare, the Medicare Part B premium reimbursement is automatic.

There is no form to file and no annual application required for the base Medicare Part B premium.

Here’s how it works:

• When you turn 65 and enroll in Medicare Part B during your open enrollment window

• New York State automatically increases your monthly pension by the amount of the standard Medicare Part B premium

• This applies to:

• The retiree

• A spouse who is covered under the New York State retiree health plan

That automatic pension increase is why New York State retiree health benefits are considered so lucrative — the reimbursement applies to both the retiree and their spouse, which can amount to thousands of dollars per year.

2026 Medicare Part B Example

In 2026, the base Medicare Part B premium is $202.90 per month.

Example:

• A New York State retiree is receiving a pension of $2,000 per month

• Upon turning 65 and enrolling in Medicare Part B

• Their pension automatically increases to $2,202.90 per month

That increase directly offsets the Medicare Part B premium that is being deducted from their Social Security check.

If you are only paying the standard Medicare Part B premium, no action is required beyond enrolling in Medicare on time.

Understanding IRMAA: Why Higher-Income Retirees Pay More for Medicare

Medicare premiums are income-based. As income rises, so does the Medicare Part B premium — this additional charge is known as IRMAA (Income-Related Monthly Adjustment Amount).

2026 IRMAA Income Thresholds

For 2026, IRMAA begins when income exceeds:

• Single filers: $109,000

• Married filing jointly: $218,000

Above those levels, Medicare Part B premiums increase in steps as income rises.

IRMAA Example for a NYS Retiree

Let’s say:

• A single New York State retiree

• With retiree health benefits

• Earns $200,000 in 2026

Instead of paying the base $202.90 per month, their Medicare Part B premium increases to $527.50 per month due to IRMAA.

That’s an additional $324.60 per month, or nearly $3,900 per year, in extra Medicare costs.

How IRMAA Reimbursements Work for New York State Retirees

New York retirees are often pleasantly surprised to find out that the retiree health plan not only reimbursement them for the standard Medicare premium but also the IRMAA amount but the IRMAA reimbursement process is not automatic.

What Happens Automatically vs. Manually

• ✅ Base Medicare Part B premium

• Reimbursed automatically through an increased pension payment

• ❌ IRMAA surcharge

• Requires a physical application each year

To receive reimbursement for IRMAA, the retiree must:

1. Complete the IRMAA reimbursement form from the New York State Department of Civil Service (below is a picture of the form)

2. Attach documentation from Social Security showing:

• The Medicare Part B premiums paid for the year

3. Mail the form and documentation to New York State

4. Receive reimbursement by check

You Can Go Back Up to Four Years to Reclaim Missed IRMAA Reimbursements

If you’re reading this and realizing you’ve been paying IRMAA for years without reimbursement — there’s good news.

New York State allows retirees to go back up to four years to recoup IRMAA premiums already paid.

On the IRMAA reimbursement form, you can:

• Check the boxes for each year you were subject to IRMAA

• Submit the required Social Security tax documentation for each year

When approved, New York State will issue reimbursement checks for those prior years.

A Simple Annual Reminder Strategy

For our clients who we know will be subject to IRMAA every year, we recommend a very simple system:

• Set a recurring reminder for January or February

• When your Social Security tax form arrives showing Medicare premiums paid:

• Complete the IRMAA reimbursement form

• Attach the documentation

• Mail it to New York State

That’s it.

New York State does not advertise this process — which is exactly why many retirees miss out on thousands of dollars they’re entitled to receive.

If you’re a New York State retiree — especially one with higher retirement income — understanding this process can mean thousands of dollars back in your pocket every year.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Attention Non-Spouse 10-Year Beneficiaries: 2030 Is Rapidly Approaching

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

If you inherited an IRA or other retirement account from a non-spouse after December 31, 2019, the clock is ticking—and for many families, the tax consequences are coming into sharper focus.

The SECURE Act, which went into effect in 2020, dramatically changed how non-spouse beneficiaries must handle inherited retirement accounts. While these rules may have seemed far off at the time, 2030 is now just around the corner for those who inherited accounts in the first year of the new law.

In this article, we’ll cover:

• How the SECURE Act’s 10-year rule works

• Why 2030 could trigger significant tax liabilities

• How market growth has quietly made the problem bigger

• Practical tax-planning strategies to consider now

• Why waiting until the last year can be costly

 A Quick Refresher: What Changed Under the SECURE Act?

Prior to 2020, most non-spouse beneficiaries could “stretch” distributions from an inherited IRA over their lifetime. This allowed smaller required distributions and, in many cases, never required the account to be fully depleted.

That all changed with the SECURE Act.

For most non-spouse beneficiaries:

• The inherited retirement account must be fully depleted within 10 years

• The rule applies to anyone who passed away after December 31, 2019

• All pre-tax dollars distributed during that period are taxable income

From the IRS’s perspective, this rule change was a revenue raiser—it ensures that inherited retirement assets become taxable within a defined window.

Why 2030 Is Such a Big Deal

For individuals who inherited a retirement account from someone who passed away in 2020, the 10-year clock runs out at the end of 2030.

That means:

• Only five tax years remain (2026–2030) before the final distribution year

• Any remaining balance must be distributed—and taxed—by the end of year 10

• Large balances could result in substantial one-year tax spikes

Many beneficiaries have only been taking small distributions or the minimum required amounts. While that may have felt prudent at the time, it can create a tax bombshell in the final year if the account balance is still large.

RMD Rules Add Another Layer of Complexity

Required Minimum Distribution (RMD) rules under the SECURE Act depend on whether the original account owner was already taking RMDs when they passed away.

• Some beneficiaries were required to take annual RMDs

• Others were not required to take annual distributions—but still must empty the account by year 10

Regardless of which category you fall into, the key issue remains the same:
Waiting too long often concentrates taxable income into fewer years.

Market Growth Has Made the Problem Bigger

Ironically, strong market performance over the past several years has amplified the issue.

For individual that have a large allocation to stocks within their inherited IRA, since the market returns have been so strong over the past few years, they may have seen the balance in their inherited IRA increase despite taking RMDs from the account each year.

This is great from a wealth-building perspective, but it also means:

• Larger balances remain late in the 10-year window

• Larger forced distributions

• Larger tax bills await

In short, investment success can unintentionally worsen the tax outcome if distributions aren’t coordinated with a broader tax plan.

Why Smoothing Income Often Makes Sense

For many non-spouse beneficiaries, the goal should be tax smoothing—intentionally spreading distributions over the remaining years to avoid one massive taxable event in year 10.

This often means:

• Taking more than the minimum each year

• Coordinating distributions with your current income level

• Evaluating how many years remain in your 10-year window

The sooner this planning happens, the more flexibility you typically have.

One Common Strategy: Offset Taxes With 401(K) Contributions

One tax-planning strategy we often explore with clients involves maximizing employer-sponsored retirement plan contributions.

Here’s a simplified example:

• A 50-year-old employee is contributing $15,000 to their 401(k)

• In 2026, they may be eligible to contribute up to $32,500

• That’s an additional $17,500 of potential pre-tax deferrals

A possible strategy:

1. Take a $17,500 distribution from the inherited IRA (taxable)

2. Increase payroll deferrals so more income flows into the 401(k) pre-tax

3. Use the inherited IRA distribution to supplement take-home pay

Result:
Taxable income from the inherited IRA distribution is fully offset by pre-tax retirement contributions, while also shifting assets into the inherited IRA owner's personal 401(k) account, which does not have a 10-year distribution restriction.

A Critical Caveat for 2026

High-income earners should be aware that starting in 2026, certain catch-up contributions for those over age 50 may be required to be made as Roth contributions. Roth deferrals do not provide an immediate tax deduction, which could limit the effectiveness of this strategy.

When Waiting Can Make Sense

Not every situation calls for accelerating distributions.

For individuals who plan to retire before the 10-year period ends, delaying distributions may be intentional and strategic. Once paychecks stop:

• Ordinary income may drop significantly

• Larger inherited IRA distributions could fall into lower tax brackets

This can be a very effective approach—but only when planned in advance. 

The Real Warning Sign to Watch For

This article isn’t about fear—it’s about awareness.

If you:

• Inherited a retirement account after 2019

• Have only been taking small distributions or RMDs

• Haven’t mapped out the remaining years of your 10-year window

There’s a real risk that a large, avoidable tax liability is waiting at the end of the road.

Final Thoughts

The SECURE Act permanently changed the landscape for non-spouse beneficiaries, and 2030 is approaching faster than many realize. Thoughtful, proactive tax planning—especially in the final years of the 10-year period—can make a meaningful difference in outcomes.

Now is the time to:

• Count the remaining years

• Project future tax exposure

• Coordinate investment, distribution, Medicare premium, and tax strategies

Advanced planning today can help turn a looming tax problem into a manageable—and sometimes even strategic—opportunity.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

New York State Secure Choice Law — Companies Are Now Required to Sponsor Retirement Plans for Employees

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The New York State Secure Choice Savings Program requires most companies and not-for-profit organization in New York to either:

• Sponsor a qualified employer-sponsored retirement plan, or

• Register for the state-run Roth IRA program and remit employee contributions.

This law affects businesses based on size and existing retirement plan offerings. In this article, we’ll explain:

• Who is covered under the law

• Important effective dates by company size

• What qualifies as an exempt employer-sponsored retirement plan

• How to certify exemptions

• Employer responsibilities in remitting contributions

• How employees interact with their state-run IRAs

• Penalties for non-compliance

• Practical tips for employers to prepare

What Is the NY Secure Choice Savings Program?

The Secure Choice program is a state-sponsored retirement savings program that allows participating employees to save for retirement through automatic payroll deductions into a Roth IRA. Employers who do not already offer a qualified plan are required to facilitate the program.

The program is overseen by the New York Secure Choice Savings Program Board and is designed to expand retirement savings access to private-sector workers across the state.

Who Must Comply?

An employer must either offer a employer-sponsored retirement plan or participate in the Secure Choice program if all of the following are true:

• The employer has 10 or more employees in New York during the prior calendar year;

• The employer has been in business for at least two years;

• The employer does not already offer an employer-sponsored retirement plan to employees.

Employers with fewer than 10 employees are generally not required to participate in the state program, though they must still register and certify exemption if applicable.

Effective Dates Based on Employer Size

Secure Choice implementation in 2026 is staggered based on the number of New York employees:

These are the dates by which employers must either:

1. Register for the Secure Choice program, or

2. Certify exemption via the official state portal.

Exemptions: Qualifying Employer-Sponsored Retirement Plans

However, even if an employer meets the employee-size threshold above, it is exempt from the Secure Choice program if it already sponsors an employer-sponsored retirement plan. Employers must still certify their exemption through the Secure Choice portal.

Qualifying employer-sponsored plans include:

• 401(k) plans

• 403(a) qualified annuity plans

• 403(b) tax-sheltered annuity plans

• SEP IRAs

• SIMPLE IRA plans

• 457(b) plans

If you offer one of the above, your business can avoid participation in the state program — but you must still submit an exemption through the official portal.

How to Certify an Exemption

Employers seeking exemption need to log in to the Secure Choice employer portal and submit documentation of their qualified plan. Details include:

• Federal Employer Identification Number (EIN)

• Access Code (typically sent to employers by mail or email)

• Plan documentation showing current retirement plan offerings

Official website for registration and exemptions: www.NewYorkSecureChoice.com

Employer Responsibilities if Participating in Secure Choice

If your business does not qualify for an exemption, you must:

1. Register for Secure Choice by the deadline assigned to your employer size.

2. Automatically enroll eligible employees into the program. (Eligibility is all employee age 18 or older with earned taxable wages)

3. Set up payroll deductions and begin subtracting employee contributions.

4. Remit contributions to the state-administered Roth IRAs.

5. Upload employee data and maintain records via the program portal.

Employers do not contribute to the accounts, and they cannot offer matching contributions under the Secure Choice IRA program.

How Contributions Work

Remitting Employee Payroll Contributions

• Contributions are deducted from employee paychecks via automatic payroll withholding.

• Employers are responsible for timely remittance of these contributions to the state program’s recordkeeper (program administrators).

• Employers do not make employer contributions.

Default Contribution and Adjustments

• Employees are typically auto-enrolled at a default 3% contribution rate of gross pay.

• Employees may adjust the contribution amount or opt out entirely within the enrollment period or later open enrollment windows.

Employee Experience With Secure Choice

Account Setup and Features

• Each participating employee gets a Roth IRA account through the Secure Choice program.

• Contributions are after-tax, meaning withdrawals in retirement are generally tax-free (subject to Roth IRA rules).

• Accounts are portable — employees keep them even if they change jobs.

Investing, Contribution Limits, and Withdrawals

• Employees can choose investment options provided by the program or stay with the default investment.

• They can change contribution rates or opt out after the initial enrollment period.

• Roth IRA contribution limits apply (e.g., the standard IRA annual limits — $7,500 for 2026 before catch-up, potentially higher with catch-up contributions for those 50+, etc.).

• Distributions follow general Roth IRA rules (qualified distributions tax-free and penalty-free after meeting age/service requirements).

How Employees Are Enrolled in the NY Secure Choice Roth IRA Program

A common question from employers is whether they are responsible for enrolling employees, or whether employees must sign themselves up. Under the New York State Secure Choice Savings Program, the process works as follows:

Employers Facilitate Enrollment — Employees Do Not Self-Enroll

Employers do not actively “sign up” employees, and employees do not enroll themselves directly. Instead, enrollment happens through automatic payroll facilitation by the employer.

Here’s how the process works step-by-step:

Step 1: Employer Registers and Uploads Employee Information

Once an employer registers for Secure Choice (or confirms participation is required), the employer must:

• Upload required employee data into the Secure Choice employer portal, including:

• Employee name

• Social Security number or Tax ID

• Date of hire

• Contact information

• Identify eligible employees who meet program requirements

• For newly hired employees, the employer needs to enroll them in the Secure Choice Program within 30 days of their hire date

This step triggers the enrollment process, but it does not immediately deduct contributions.

Step 2: Employees Receive Enrollment Notice From the State Program

After the employer uploads employee information:

• The Secure Choice program (or its appointed program administrator) sends official enrollment notices directly to employees

• The notice explains:

• That the employee will be automatically enrolled

• The default contribution rate

• How to opt out or change contribution levels

• Where to access their account online

This communication comes from the state program, not the employer.

Step 3: Automatic Enrollment Occurs Unless the Employee Opts Out

If the employee takes no action during the notice period:

• The employee is automatically enrolled in a state-sponsored Roth IRA

• Payroll deductions begin at the default contribution rate (generally 3% of gross pay, unless adjusted by the employee)

If the employee chooses to opt out:

• No deductions are taken

• The employer must maintain records showing the opt-out election

Step 4: Employer Begins Payroll Withholding and Remittance

Once enrollment is active:

• The employer withholds the elected contribution amount from each paycheck

• Contributions are remitted to the Secure Choice program on a recurring basis, aligned with payroll schedules

• The employer’s role is limited to withholding and remitting contributions — similar to payroll taxes

Importantly:

• Employers do not select investments

• Employers do not manage accounts

• Employers do not provide investment advice

• Employers do not contribute employer funds

Step 5: Ongoing Employee Control

After enrollment:

• Employees manage their own accounts directly through the Secure Choice program

• Employees can:

• Change contribution percentages

• Opt out or opt back in later

• Select or change investment options

• Request distributions (subject to Roth IRA rules)

The account belongs to the employee and is fully portable if they change jobs.

Penalties for Non-Compliance

While specific penalties in the Secure Choice law are still being formalized, failure to register or certify your exemption by the applicable deadline can subject employers to:

• Administrative penalties and fines

• Potential liability for missed remittance obligations

• Ongoing penalties until compliance is achieved

For example, programs in other states have assessed penalties like $250 per employee per month for non-compliance, escalating over time. While New York’s specific fines may vary, the risk of enforcement is real and growing as the program rolls out statewide. However, as of February 2026, New York has yet to communicate when penalities will begin and what the amounts will be.

Tips for Employers

Start Early — Don’t Wait

Act well in advance of your registration deadline. If your company currently sponsors an employer-sponsored retirement plan, it’s making sure someone on your team will be logging into the NYS portal to file the exemption. For companies that plan to implement an employer-sponsored retirement plan prior to their deadline, there is extreme urgency to start evaluating as soon as possible both the type of plan that is best for the company and the platform for their plan. Establishing an employer-sponsored plan often involves:

• Plan design and adoption

• Document creation and compliance testing

• Employee communications and elections

• Payroll integration

If it’s the intent of your company / organization not establish a retirement plan and enroll employees in the state-mandated Roth IRAs, advanced action is still required. Companies will be required to gather the employee data and upload it to the NYS Secure Choice website, confirm how payroll will handle the automatic Roth deductions from payroll, who will be responsible for remitting the contributions to the NYS platform each pay period, and communication to the employees in advance of the payroll deduction is highly recommended.

Many businesses will be acting on these requirements in 2026 — waiting until the last minute can create unnecessary compliance risk.

Evaluate Whether to Offer Your Own Plan

Offering a 401(k) or other qualified plan may be more attractive for recruiting and retention, may allow employer matching, and could provide tax incentives not available under the state program. Also, there are a number of tax credits currently available to help offset some or all of the plan fees associated with establishing an employer-sponsored retirement plan for the first time. See our article below for detail on the start-up plan tax credits available:

GFG Article: 3 New Start-up 401(k) Tax Credits

How Many Other States Have Similar Mandated Retirement Programs?

New York is not alone in adopting a mandatory retirement savings program for private-sector employees. In fact, Secure Choice builds on a growing national trend aimed at addressing the retirement savings gap for workers who do not have access to an employer-sponsored plan.

As of today:

• More than a dozen states (15+) have enacted legislation requiring certain employers to either:

• Offer a qualified employer-sponsored retirement plan, or

• Participate in a state-facilitated IRA program funded through payroll deductions.

• Several of these programs are fully operational, while others are in various stages of implementation or phased rollout.

• States that were early adopters (such as California, Oregon, and Illinois) now have millions of workers enrolled and billions of dollars in assets within their state-facilitated retirement programs.

New York Has Selected Vestwell

New York has selected a company by the name of Vestwell to serve as the program administrator for the state-mandated Roth IRA accounts.

Choosing a Startup Retirement Plan Provider: What Employers Should Know

For many employers, the Secure Choice law will prompt a first-time decision about whether to start an employer-sponsored retirement plan instead of participating in the state-run IRA program. While this can be a positive move for employee recruitment and retention, it’s important to understand that not all startup plan providers — or pricing models — are the same.

There Are Many Choices — and Fees Vary Widely

Employers exploring startup plans will quickly find a wide range of providers, including bundled platforms, payroll-integrated solutions, and self-directed providers. Costs can differ significantly depending on:

• Plan administration fees

• Investment platform and fund expenses

• Recordkeeping and compliance costs

• Per-participant charges

• Advisor or fiduciary service fees (if applicable)

Some providers advertise low headline pricing but layer on additional costs elsewhere. Others charge flat fees that may be economical at certain asset levels but expensive for smaller plans. Understanding how fees are structured — and how they may grow over time — is critical when selecting a provider.

Start-up 401(k) Provider

In the past, we have worked with companies that successfully used Employee Fiduciary as a start-up 401(k) solution. Employee Fiduciary is a national-level 401(k) provider that offers flexibility with plan design, Vanguard index funds for investment options, and fee transparency.

Disclosure:  This statement is not an endorsement of Employee Fiduciary or their 401(k) solution. Our firm has had experience in working with Employee Fiduciary in the past, and since we do not offer investment services to start-up plans, we want to be able to connect readers with what I, as the author of this article, deem to be a high-quality start-up 401(k) plan solution.  Our firm does not receive any form of compensation for referring clients to Employee Fiduciary.

Conclusion

The New York Secure Choice Savings Program represents a significant change for private employers in the state. Whether you must register for the state-run IRA program or certify exemption with your existing retirement plan, compliance is mandatory and deadlines are coming fast in 2026.

By planning ahead — and consulting legal, tax, or benefits professionals if needed — employers can meet these requirements smoothly while ensuring their employees have access to valuable retirement savings opportunities.

A Note on Our Firm’s Focus

Our firm does not offer solutions for brand-new startup plans. We specialize in working with established retirement plans that already have at least $250,000 in plan assets, for which we provide investment management and plan consulting services.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Trump Accounts For Minor Children Explained: A New Wealth-Building Opportunity

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Over the past several months, we’ve received a lot of questions from parents and grandparents about the new Trump Accounts created under the 2025 tax reform. Most of those questions fall into a few clear categories:

• How do Trump Accounts get set up?

• Who can fund them, and how much can be contributed?

• What makes them different from traditional or Roth IRAs?

• And most importantly—are they really worth it?

What’s driving so much interest is that these accounts can be a tremendous long-term wealth-building opportunity for children and grandchildren. Unlike traditional or Roth IRAs, which require earned income to contribute, Trump Accounts allow up to $5,000 per year in contributions even if the child has no income at all. That creates decades of potential tax-deferred compounding.

That said, Trump Accounts also come with a unique set of rules, especially while the account owner is a minor. In this article, we’ll break down how Trump Accounts work, how they’re funded, how they interact with other retirement accounts, and where the real planning opportunities—and responsibilities—exist.

What Is a Trump Account?

A Trump Account is a new type of retirement account designed specifically for minors, created as part of the One Big Beautiful Bill Act of 2025. Conceptually, it is built on the framework of a traditional IRA, but with special rules that apply from birth through age 17.

The goal of these accounts is simple: to jump-start retirement savings as early as possible, even before a child has their first job.

Contribution Limits and Funding Rules

Annual Contribution Limits

• Total annual contributions are limited to $5,000 per year

• Of that amount, up to $2,500 may come from an employer

• These limits apply beginning in 2026 and will be indexed for inflation in future years

Who Can Contribute?

Trump Accounts can receive contributions from several sources:

• Parents, grandparents, or other individuals (after-tax)

• Employers (pre-tax)

• Government or charitable entities (pre-tax)

• A one-time $1,000 federal government contribution for eligible children

Importantly, individual contributions are made with after-tax dollars, meaning they create “basis” in the account, while employer and government contributions are pre-tax.

The $1,000 Government Contribution

As part of a pilot program, the federal government will contribute $1,000 to a Trump Account for children born between 2025 and 2028, provided the parent or guardian opts in.

Key points:

• The contribution is pre-tax

• It does not count toward the $5,000 annual limit

• Parents must actively elect the contribution—it is not automatic

This is essentially “free money,” and for many families, that alone may justify opening the account.

How Trump Accounts Can Be Invested

Trump Accounts have very strict investment rules:

• Accounts must be established with initial trustees selected by the U.S. Treasury

• Individuals may have only one Trump Account

• Investments are limited to unleveraged mutual funds or ETFs

• The investments must track a qualified index of primarily U.S. equities

• Holding cash is virtually not allowed

• Total investment fees cannot exceed 0.10%

At this time, the list of approved custodians has not yet been released, and is expected sometime in 2026.

How and When Trump Accounts Are Set Up

Trump Accounts cannot be opened with a traditional custodian yet.

Here’s what we know about the setup process:

• Accounts become operational starting July 4, 2026

• All accounts must initially be opened using U.S. Treasury–approved trustees

• A new IRS Form 4547 and an online application at trumpaccounts.gov are expected to launch in mid-2026

• To establish the accounts Form 4547 or the special application can be submitted prior to the July 4, 2026 program launch date

• That same process will be used to request the $1,000 government contribution

Once established, families can begin making annual contributions.

Special Rule for Working Minors

One of the most powerful planning features applies to minors who do have earned income.

If a child earns income:

• They can contribute to a Trump Account

• They can also contribute to a traditional IRA or Roth IRA

• The contribution limits do not reduce or affect one another

In other words, a working minor can fund both account types in the same year, creating even more long-term compounding potential.

Roth Conversion Opportunity After Age 18

Once the account owner turns 18, Trump Accounts largely revert to standard traditional IRA rules.

This is where advanced planning opportunities emerge:

• It can then be converted to a Roth IRA

• Once converted, future growth and qualified withdrawals may be tax-free

However, there’s an important catch.

Tracking Basis Is Critical

• Individual contributions were made with after-tax dollars

• Employer and government contributions are pre-tax

• Investment growth is pre-tax

This creates a mixed-tax account, requiring careful basis tracking over time. If records aren’t maintained, the IRS may treat withdrawals as fully taxable.

Beware of Kiddie Tax:  Roth conversions trigger a taxable event for any pre-tax contributions or earnings held within the Trump Account.  Conversions and distributions from IRAs are considered unearned income of the minor child, which can trigger the Kiddie tax, making the taxable distribution amount subject to tax at the parent’s tax rate instead of the child’s.

Employer Contributions Are Allowed

Employers are permitted to contribute to Trump Accounts:

• Contributions are pre-tax

• They may be made for the employee or the employee’s dependent child

• Employer contributions count toward the $5,000 annual limit (up to $2,500)

This opens the door for unique employer-based benefits and planning strategies.

How Trump Account Distributions Work After Age 18

Once a child reaches age 18, Trump Accounts undergo an important transition. While these accounts are designed for minors, the distribution rules after age 18 closely resemble those of a traditional IRA, which introduces both flexibility and responsibility.

Understanding how distributions work at this stage is critical, because mistakes can create unnecessary taxes or penalties.

No Distributions Before Age 18

First, it’s important to note that Trump Accounts do not allow distributions prior to age 18. Until then, the account is strictly a long-term retirement vehicle.

Once the account owner reaches the year they turn 18, distributions become available—but that does not mean they are penalty-free.

Traditional IRA Rules Apply After Age 18

Beginning in the year the child turns 18, the Trump Account is treated much like a traditional IRA for tax purposes. That means:

• Distributions are generally taxable

• Early withdrawals may be subject to a 10% penalty

• The account follows pro-rata taxation rules if it contains both after-tax and pre-tax money

How Distributions Are Taxed

Trump Accounts typically hold two types of money:

1. After-tax contributions (from parents, grandparents, or others)

2. Pre-tax dollars, which include:

• Employer contributions

• Government contributions (including the $1,000 pilot contribution)

• All investment growth

When a distribution is taken, the IRS does not allow the account owner to choose which dollars come out. Instead, each withdrawal is treated as a proportional mix of taxable and non-taxable funds.

Example (Simplified)

If 25% of the account consists of after-tax contributions, then:

• 25% of any distribution is tax-free

• 75% is taxable as ordinary income

This makes accurate recordkeeping essential, since the after-tax portion (known as “basis”) must be documented to avoid overpaying taxes.

Early Withdrawal Penalties Still Apply

Although distributions are allowed after age 18, they are not automatically penalty-free.

• Withdrawals before age 59½ generally incur a 10% early withdrawal penalty

• Certain exceptions may apply, such as:

• Qualified higher education expenses

• Limited first-time home purchase expenses

• Certain structured payment arrangements

Absent one of these exceptions, both income taxes and penalties may apply.

Rollovers and Roth Conversions Instead of Distributions

Rather than taking cash distributions, many families will focus on rollovers and Roth conversions, which are allowed once the account owner turns 18.

At that point:

• The Trump Account can be rolled into a traditional IRA

• It may then be converted to a Roth IRA

A Roth conversion is taxable on the pre-tax portion of the account, but once completed, future growth and qualified withdrawals can be tax-free.

This strategy can be especially powerful if conversions are done during low-income years, though taxes still must be paid—ideally using funds outside the account to avoid penalties.

Final Thoughts

Trump Accounts represent a powerful but complex planning tool. For families focused on long-term retirement wealth for children or grandchildren, they offer an early start that was never possible before. However, the rules around taxation, investment limitations, and recordkeeping mean these accounts should be used strategically, not blindly.

As always, thoughtful planning—and understanding how these accounts fit into the bigger financial picture—makes all the difference.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

1. Do children need earned income to have a Trump Account?
No. Earned income is not required.

2. Are contributions tax-deductible?
Individual contributions are not deductible. Employer and government contributions are pre-tax.

3. Can grandparents contribute?
Yes, as long as total annual limits are respected.

4. Can a child have more than one Trump Account?
No. Only one account per individual is allowed.

5. When can withdrawals be taken?
Distributions follow traditional IRA rules and generally are penalty-free after age 59½.

6. Are Roth conversions allowed?
Yes, starting at age 18 once the account follows IRA rules.

7. Are these accounts required to invest in stocks?
Yes. Investments must track qualified U.S. equity indexes.

8. Is the $1,000 government contribution automatic?
No. Parents must opt in using the IRS process.

Can You Give Money to Your Grandkids Tax-Free? Here’s What the IRS Says

Many grandparents want to help their grandchildren financially—whether it’s for education, a first home, or simply to transfer wealth during their lifetime. But the question often arises: will my grandkids owe taxes on those gifts? In most cases, the answer is no—the recipient of a gift doesn’t pay taxes. Instead, the giver may need to file a gift tax return if the gift exceeds the annual exclusion amount. Here’s how the IRS actually handles gifts to grandchildren, what forms apply, and how to avoid unnecessary taxes or filing headaches.

Who Pays the Tax on a Gift?

Under IRS rules, the person making the gift (the donor) is responsible for any gift tax—not the person receiving it. This means if a grandparent gives money, investments, or property to a grandchild, the child typically doesn’t report or owe anything.

However, there are thresholds to know:

• Annual gift tax exclusion (2025): $19,000 per recipient

• Lifetime gift and estate tax exemption (2025): $13.99 million per person

If a grandparent gives less than $19,000 to any one grandchild during the year, no filing or tax applies. Gifts above that limit simply require Form 709, but gift tax is only owed once total lifetime gifts exceed the $13.99 million exemption.

Studies show that fewer than 1% of Americans ever owe gift tax—most gifts fall well below these thresholds.

What Counts as a Gift

The IRS defines a gift as any transfer where full value isn’t received in return. Common examples include:

• Cash gifts or checks

• Paying a grandchild’s tuition or medical bills directly

• Contributing to a 529 plan

• Transferring stocks or real estate below market value

Tuition and Medical Exceptions

Certain payments don’t count toward the annual gift limit if you pay the institution directly:

• Tuition paid straight to a college or private school

• Medical expenses paid directly to a hospital or provider

These payments are excluded from both the annual and lifetime gift limits, making them powerful estate-planning tools for grandparents who want to help without triggering IRS reporting.

Gifting Through a 529 Plan

A popular way to help grandchildren is through 529 college savings plans. Contributions are treated as gifts for tax purposes, but there’s a special election that allows grandparents to “front-load” five years’ worth of annual exclusions.

• In 2025, you can contribute up to $95,000 per grandchild ($19,000 × 5) without using any lifetime exemption.

• Married couples can jointly contribute up to $190,000 per grandchild with the same rule.

This allows for significant education funding while keeping assets out of the grandparent’s taxable estate.

What the IRS Actually Looks At

When reviewing gifts, the IRS primarily focuses on:

1. Value and documentation – was the transfer properly valued and recorded?

2. Ownership control – did the grandparent truly give up control of the asset?

3. Direct vs. indirect payments – paying tuition directly to a school is excluded; writing a check to the grandchild is not.

4. Cumulative totals – large gifts across multiple years can push a donor closer to their lifetime exemption.

It’s rare for the IRS to flag or audit small gifts, but clear documentation and Form 709 filings for larger transfers help prevent confusion or estate complications later.

Tax-Free Ways to Support Grandkids

There are several strategies to help grandchildren financially without ever triggering gift tax concerns:

• Pay tuition or medical bills directly to the provider

• Make annual $19,000 gifts to as many recipients as desired

• Fund 529 plans using the 5-year front-loading rule

• Use custodial accounts (UGMA/UTMA) for small transfers

• Contribute to Roth IRAs for working grandchildren (earned income required)

Each of these options lets you transfer wealth efficiently while minimizing tax reporting.

When a Gift Tax Return Is Required

A federal gift tax return (Form 709) is required when:

• You give more than $19,000 to one individual in a single year (2025 limit)

• You give property or assets that exceed the annual limit in fair market value

• You elect to spread a 529 plan contribution over five years

Filing doesn’t mean you owe tax—it simply allows the IRS to track your lifetime exemption usage. Most taxpayers never actually pay gift tax; they only report it for record-keeping purposes.

FAQs: Gifting to Grandchildren

Q: Do my grandchildren have to report a cash gift on their tax return?
A: No. Gifts are not considered taxable income to the recipient and don’t need to be reported.

Q: How much can I give my grandchild without filing a gift tax return?
A: You can give up to $19,000 per grandchild in 2025 without any filing requirement.

Q: What happens if I exceed the $19,000 limit?
A: You’ll file Form 709, but you likely won’t owe any gift tax unless you’ve already used your $13.99 million lifetime exemption.

Q: Do 529 plan contributions count as gifts?
A: Yes, but you can elect to treat large contributions as if they were made evenly over five years to stay within the annual exclusion limits.

Q: Can I pay my grandchild’s college tuition tax-free?
A: Yes, as long as the payment goes directly to the educational institution, it doesn’t count toward the annual exclusion.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

Retirement Tax Traps and Penalties: 5 Gotchas That Catch People Off Guard

Even the most disciplined savers can be blindsided in retirement by unexpected taxes, penalties, and benefit reductions that derail a carefully built plan. These “retirement gotchas” often appear subtle during your working years but can cost tens of thousands once you stop earning a paycheck.

Here are five of the biggest surprises retirees face—and how to avoid them before it’s too late.

1. The Tax Torpedo from Social Security

Many retirees are surprised to learn that Social Security isn’t always tax-free. Depending on your income, up to 85% of your benefit can be taxed.

The IRS uses something called “provisional income,” which includes half your Social Security benefit plus all other taxable income and tax-free municipal bond interest.

• For individuals, taxes begin when provisional income exceeds $25,000.

• For married couples, it starts at $32,000.

A well-intentioned IRA withdrawal or capital gain can push you over these thresholds—causing a sudden jump in taxes. Strategic Roth conversions and careful withdrawal sequencing can help smooth this out over time.

2. Higher Medicare Premiums (IRMAA)

The Income-Related Monthly Adjustment Amount (IRMAA) is one of the most overlooked retirement costs. Once your modified adjusted gross income (MAGI) exceeds certain limits, your Medicare Part B and D premiums increase—often by thousands of dollars per year.

For 2025, IRMAA surcharges begin when MAGI exceeds roughly $103,000 for single filers or $206,000 for married couples. The catch? Medicare looks back two years at your income. A Roth conversion, property sale, or large one-time distribution can unexpectedly trigger higher premiums two years later.

Proactive tax planning can prevent crossing these thresholds unintentionally.

3. Required Minimum Distributions (RMDs)

Once you reach age 73, the IRS requires you to start withdrawing from pre-tax retirement accounts each year—whether you need the money or not. These RMDs are taxed as ordinary income and can increase your tax bracket, raise Medicare premiums, and reduce your eligibility for certain deductions.

The biggest mistake is waiting until your 70s to plan for them. Roth conversions in your 60s can reduce future RMDs, and charitable giving through Qualified Charitable Distributions (QCDs) can offset the tax impact once they begin.

4. The Widow’s Penalty

When one spouse passes away, the surviving spouse’s tax brackets and standard deduction are cut in half—but income sources often don’t decrease proportionally. Social Security may drop by one benefit, but RMDs, pensions, and investment income remain largely the same.

The result is a higher effective tax rate for the survivor. This “widow’s penalty” can last for years, especially when combined with RMDs and Medicare surcharges. Couples can reduce the long-term impact through lifetime Roth conversions, strategic asset titling, and beneficiary planning.

5. State Taxes and Hidden Relocation Costs

Many retirees move to lower-tax states hoping to stretch their income, but state-level taxes can be tricky. Some states tax pension and IRA withdrawals, others tax Social Security, and a few impose taxes on out-of-state income or estates.

Additionally, higher property taxes, insurance premiums, and healthcare costs can offset income tax savings. A comprehensive cost-of-living comparison is essential before relocating.

Our analysis at Greenbush Financial Group often reveals that the “best” retirement state depends more on quality of life, healthcare access and total cost of living than on income tax rates alone.

How to Avoid These Retirement Surprises

Most retirement gotchas come down to timing and coordination—especially between taxes, Social Security, and healthcare. A few key steps can make a major difference:

• Run retirement income projections that include taxes and IRMAA thresholds.

• Consider partial Roth conversions before RMD age.

• Sequence withdrawals intentionally between taxable, tax-deferred, and Roth accounts.

• Evaluate the long-term impact of home state taxes before moving.

• Review beneficiary and trust structures regularly.

The earlier you identify potential traps, the easier they are to fix while you still control your income and withdrawals.

The Bottom Line

Retirement is more complex than simply replacing a paycheck. The interplay between taxes, healthcare, and income sources can turn small decisions into costly mistakes. By spotting these gotchas early, you can preserve more of your wealth and enjoy a smoother, more predictable retirement.

Our advisors at Greenbush Financial Group can help you identify your biggest risk areas and design a plan to minimize the tax and income surprises most retirees never see coming.

FAQs: Retirement Planning Surprises

Q: Are Social Security benefits always taxed?
A: No. But depending on your income, up to 85% of your benefits may be taxable.

Q: How can I avoid higher Medicare premiums?
A: Manage your income below IRMAA thresholds through strategic Roth conversions and tax-efficient withdrawals.

Q: What happens if I miss an RMD?
A: You could face a 25% penalty on the amount not withdrawn, reduced to 10% if corrected quickly.

Q: Why do widows and widowers pay more in taxes?
A: Filing status changes from joint to single, cutting brackets and deductions in half while much of the income remains.

Q: Are all retirement states tax-friendly?
A: No. Some states tax retirement income or have higher overall costs despite no income tax.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

Social Security Cost of Living Increase Only 2.8% for 2026

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The Social Security Administration (SSA) has announced that the annual Cost-of-Living Adjustment (COLA) for 2026 will be 2.8%, up slightly from 2.5% in 2025, but still below the ten-year average of about 3.1%. While any increase in Social Security benefits is welcome news for retirees, many experts and retirees alike worry that this modest adjustment may not be enough to keep pace with rising living costs.

In this article, we’ll cover:

• How the 2026 COLA compares to previous years

• Why this year’s increase may not keep up with inflation

• The lag retirees face when inflation heats up

• Possible strategies to help offset higher costs

The 2026 COLA: Modest in Historical Context

While the 2.8% increase may seem like a fair bump, it’s actually on the lower end of recent COLA adjustments. Here’s a look at the last five years of Social Security COLAs:

As the table shows, retirees experienced significant boosts during the high-inflation years of 2022 and 2023, but those increases have tapered off as inflation cooled — at least according to official data. However, many households continue to feel that everyday prices for groceries, utilities, and especially healthcare haven’t truly come back down.

Why the 2026 COLA May Not Be Enough

Although the 2.8% COLA aims to help beneficiaries keep up with inflation, many retirees report that their actual cost of living has increased by well over 3%. Everyday expenses — particularly healthcare premiums, prescription drugs, and food — have outpaced average inflation in recent years.

For retirees living on a fixed income, this can feel like a slow squeeze. Even small differences between the COLA and real inflation can add up to a meaningful loss in purchasing power over time.

The Timing Problem: If Inflation Heats Up, Help May Be a Year Away

One major challenge with the COLA system is timing. Adjustments are made once per year, based on inflation readings from the third quarter of the previous year.

That means if inflation begins to surge again in mid-2026 — say, to 4% or higher — retirees won’t see an increase in their Social Security benefits until January 2027. By then, a full year of higher prices could have eroded much of their financial cushion.

For retirees already struggling to cover basic costs, that lag can create a serious hardship.

What Can Retirees Do?

If the COLA isn’t keeping up with rising expenses, retirees may need to take proactive steps to protect their financial well-being. A few options to consider:

• Reevaluate annual spending. Look for non-essential expenses that can be trimmed or delayed.

• Explore part-time or flexible income. Even modest earnings can help bridge the gap during higher-inflation periods.

• Lean on family support if necessary. Having an honest discussion about temporary help from family members can make a meaningful difference.

• Revisit your financial plan. This is a good time to review your withdrawal strategy, investment income, and emergency savings to make sure your plan can weather inflation surprises.

The Importance of Adjusting Retirement Projections for Inflation

When planning for retirement, it’s critical to adjust annual expenses for inflation in your projections. Even modest inflation can dramatically change your future spending needs.

Let’s look at an example:

• A 65-year-old retiree today has annual living expenses of $60,000.

• If inflation averages 3% per year, by age 75, those same expenses would grow to roughly $80,600.

That’s over $20,000 more per year — just to maintain the same standard of living.

Failing to account for inflation in your retirement projections can lead to underestimating how much income you’ll truly need down the road. Whether you’re living off investment withdrawals, pensions, or Social Security, it’s essential to plan for rising costs and ensure your income sources can keep pace.

Final Thoughts

Now more than ever, staying proactive about budgeting, income planning, and inflation protection strategies is essential. Social Security was never meant to cover all retirement expenses — and in today’s environment, it’s important to ensure your broader financial plan can pick up where the COLA falls short.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

How much will Social Security benefits increase in 2026?
The Social Security Administration announced a 2.8% Cost-of-Living Adjustment (COLA) for 2026, a modest rise from 2.5% in 2025. This increase remains below the ten-year average of roughly 3.1%.

Why is the 2026 COLA increase considered modest?
While the 2.8% adjustment helps offset inflation, it’s smaller than the larger increases retirees saw in 2022 and 2023 during periods of high inflation. Many retirees feel everyday costs, especially for healthcare and essentials, continue to rise faster than official inflation measures suggest.

How does the timing of COLA adjustments affect retirees?
COLA calculations are based on inflation data from the third quarter of the previous year, meaning there’s often a delay in responding to rising prices. If inflation increases during 2026, beneficiaries won’t see higher payments until 2027, leaving a potential gap between expenses and income.

What can retirees do if their Social Security increase isn’t keeping up with inflation?
Retirees can review spending habits, trim non-essential costs, explore part-time income opportunities, and update financial plans to better manage inflation risks. Maintaining flexibility and preparing for price changes can help preserve purchasing power.

How can inflation impact long-term retirement planning?
Even moderate inflation significantly raises living costs over time. For example, a retiree spending $60,000 annually could need over $80,000 within ten years if inflation averages 3%, underscoring the importance of including inflation adjustments in retirement projections.

Why is it important to revisit a financial plan regularly during retirement?
Regularly reviewing your financial plan helps ensure that income sources, such as investments or pensions, continue to meet rising expenses. Adjusting for inflation, healthcare costs, and market changes can help retirees maintain their desired standard of living.

The Advantages of Using Appreciated Securities to Fund a Donor-Advised Fund

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Many individuals fund their donor-advised funds (DAFs) with cash — but they may be missing out on a major tax-saving opportunity. By gifting appreciated securities (such as stocks, mutual funds, or ETFs) from a brokerage account instead of cash, taxpayers can avoid capital gains taxes and still receive a charitable deduction for the fair market value of the gift.

In this article, we’ll cover:

• Why donor-advised funds have grown in popularity

• The pros and cons of funding a DAF with cash

• How gifting appreciated securities can create a double tax benefit

• Charitable deduction limitations to keep in mind when using this strategy

The Rise in Popularity of Donor-Advised Funds

Donor-advised funds have become one of the most popular charitable giving vehicles in recent years. Much of this growth is tied to changes in the tax code — particularly the increase in the standard deduction.

Since charitable contributions are itemized deductions, taxpayers must itemize in order to claim them. But with the standard deduction now so high, fewer taxpayers itemize their deductions at all.

For example:

• In 2025, the standard deduction for a married couple is $31,500.

• Let’s say that a couple pays $10,000 in property taxes and donates $10,000 to charity.

• Their total itemized deductions would be $20,000, which is still below the $31,500 standard deduction — meaning they’d receive no additional tax benefit for their $10,000 charitable gift.

That’s where donor-advised funds come in.

If this same couple plans to give $10,000 per year to charity for the next five years (totaling $50,000), they could “bunch” those future gifts into one year by contributing $50,000 to a donor-advised fund today. This larger, one-time contribution would push their itemized deductions well above the standard deduction threshold, allowing them to capture a significant tax benefit in the current year.

Another advantage is flexibility — the funds in a donor-advised account can be invested and distributed to charities over many years. It’s a way to pre-fund future giving while taking advantage of a larger immediate tax deduction.

Funding with Cash

It’s perfectly fine to fund a donor-advised fund with cash, especially if your goal is simply to capture a large charitable deduction in a single tax year.

Cash contributions are straightforward and qualify for a deduction of up to 60% of your adjusted gross income (AGI). But while this approach helps you maximize deductions, there may be an even more tax-efficient way to give — especially if you own highly appreciated investments in a taxable brokerage or trust account.

Using Appreciated Securities to Make Donor-Advised Fund Contributions

A potentially superior strategy is to contribute appreciated securities instead of cash. Doing so provides a double tax benefit:

1. Avoid paying capital gains tax on the unrealized appreciation of the asset.

2. Receive a charitable deduction for the fair market value of the donated securities.

Here’s an example:

• Suppose you bought Google stock for $5,000, and it’s now worth $50,000.

• If you sell the stock and then donate the $50,000 cash to your donor-advised fund, you’d owe capital gains tax on the $45,000 gain.

• Alternatively, if you donate the stock directly to your donor-advised fund, you:

• Avoid paying tax on that $45,000 unrealized gain, and

• Still receive a $50,000 charitable deduction for the fair market value of the stock.

After the transfer, if you’d still like to own Google stock, you can repurchase it within your brokerage account — effectively resetting your cost basis to the current market value. This approach can help manage future capital gains exposure while supporting your charitable goals.

Charitable Deduction Limitations: Cash vs. Appreciated Securities

Whether you donate cash or appreciated securities, it’s important to understand the IRS limits on charitable deductions relative to your income. These limitations are based on a percentage of your adjusted gross income (AGI) and vary depending on the type of asset you donate:

This means if you donate appreciated securities worth more than 30% of your AGI, the excess amount can’t be deducted in the current year — but it can be carried forward for up to five additional years until fully utilized.

Being mindful of these limits ensures that your charitable giving strategy is both tax-efficient and compliant.

Final Thoughts

Using appreciated securities to fund a donor-advised fund can be one of the most effective ways to maximize your charitable impact and minimize taxes. By avoiding capital gains tax on appreciated assets and receiving a deduction for their full fair market value, you can create a powerful, ongoing giving strategy that benefits both your finances and your favorite causes.

Before implementing this strategy, it’s wise to work with your financial advisor or CPA to confirm eligibility, ensure proper documentation, and coordinate timing for optimal tax efficiency.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

Why is donating appreciated securities to a donor-advised fund more tax-efficient than giving cash?
Donating appreciated securities allows you to avoid paying capital gains tax on the investment’s appreciation while still receiving a charitable deduction for its fair market value.

How does a donor-advised fund help maximize charitable deductions?
A donor-advised fund (DAF) allows you to “bunch” multiple years of charitable contributions into a single tax year, pushing your itemized deductions above the standard deduction threshold. This strategy can help you capture a larger tax benefit in the current year while retaining flexibility to distribute funds to charities over time.

What are the IRS deduction limits for donating appreciated securities versus cash?
Cash donations to public charities or donor-advised funds are generally deductible up to 60% of your adjusted gross income (AGI), while donations of appreciated securities are limited to 30% of AGI. Any unused deductions can typically be carried forward for up to five years.

Can I repurchase the same securities after donating them to a donor-advised fund?
Yes. After donating appreciated securities, you can repurchase the same investment within your brokerage account. This effectively resets your cost basis to the current market value, helping manage future capital gains exposure while maintaining your investment position.

Who might benefit most from using appreciated securities to fund a donor-advised fund?
This strategy is especially beneficial for investors with highly appreciated assets in taxable accounts who want to support charitable causes while reducing taxes. It can also help high-income earners manage taxable income in peak earning years.

What are some common mistakes to avoid when donating appreciated securities?
Common pitfalls include selling the securities before donating them (which triggers capital gains tax) or failing to meet IRS substantiation requirements for non-cash gifts. Working with a financial advisor or CPA ensures proper execution and documentation.