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Deferred Gift Annuities

A deferred gift annuity is very similar to a "regular" charitable gift annuity except that the annuity payments do not begin until a future date of the donor's choosing. This deferral of annuity payments results in a higher payment rate and a significantly larger income tax deduction. Deferred gift annuities are particularly favorable to young donors who need an immediate tax deduction but do not need income right away. Many use them to supplement retirement income and therefore defer the onset of payments until their anticipated year of retirement. With the limits placed on many tax-favored retirement arrangements, such as IRAs, Keoghs, 401(k) and 403(b) plans, the deferred gift annuity is becoming increasingly popular. Deferred gift annuities are also a favorable option for those who must begin drawing from their retirement funds now, but don't need the income right away.

Example

Jane Sutton, age 55, is doing very well in her career but is frustrated that she can’t add more to her IRA for added security upon her retirement.  She would like to increase her support for Sarah Lawrence.  By establishing a $20,000 deferred gift annuity with payments beginning in 10 years she can accomplish the following:

  • Receive an immediate income tax deduction of $3, 663*
  • Begin receiving payments at age of 65 at a payment rate of 8%**, or $1,600 annually, a portion of which is tax-free during her expected lifetime
  • Eliminate possible estate tax due on $20,000
  • Make a gift to Sarah Lawrence that she might otherwise not be able to afford

*Based on a discount rate of 2%
** American Council on Gift Annuities recommended rates as of 2/1/09

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For more information, please contact Judith Katz, Senior Director of Major Gifts and Gift Planning, at (914) 395-2526 or giftplanning@sarahlawrence.edu.