If you’ve done any research into retirement or investing, you’ve probably encountered several terms: 401k, Roth 401k, IRA, Roth IRA, 403b, 457, and several others. I had never in my life actually taken an interest in tax law until this past year, and it’s a little scary just how much there is to learn. Most importantly, you should know which of these terms are relevant to your work and financial situation. But I’d like to present a new term:
The G-IRA.
In true modern Christian fashion, this means “God IRA“, or “Giving IRA” if you must. What do I mean? First, let’s look at retirement contributions.
One of the central tenets of the Financial Independence community is contributing as much as you legally can to tax-sheltered retirement accounts. Ideally, by saving large portions of your income, you are using your savings to “max out” your contributions to the various accounts available to you. The IRS determines the contribution limits for these accounts, and the limits typically increase from year to year. For example, this year I can contribute a maximum of $18,500 total between my 401k and Roth 401k, both of which are made available by my employer. This acts as one bucket, where some of the money could be in the Roth 401k, and some in the (traditional) 401k. Another bucket is the IRA, which currently has a contribution limit of $5,500 total between (traditional) IRA and Roth IRA. So the goal is to max these out. Some people will have access to a 403b instead of a 401k, so that gets maxed, some have access to a 457, so that gets maxed, and others who own a business have access to a special type of 401k, so that gets maxed. It gets a little crazy, but the whole idea is to max out every tax-sheltered account that is available to you before investing in taxable accounts (which do, however, play a different strategic role).
So what does this have to do with the G-IRA?
Well, if we shoot for clean, fixed numbers for our contributions, why not also shoot for clean, fixed numbers for giving? It’s easy for me to be excited that I am $3,500 away from maxing out my Roth IRA (I’m not mixing it with a traditional IRA), but what if I were also excited to be giving to God’s purposes?
Last month I felt like God was bringing this to my attention. I won’t write much about my employment situation, but suffice it so say that I could easily have been laid off early in the year, but I wasn’t, and I have learned a tremendous amount since then. God really pressed it upon my heart that all of this is from Him, so although it’s great that I am trying to save as much as I can and make wise financial decisions, why not give some of my earnings away, since so much has been gifted to me in the first place? I felt like God gave me a target number. “Can you let go of this much?” My answer was, “Yes, I would like to”. And so this has become my G-IRA, a bucket I’m hoping to “max out”.
Some attributes to the G-IRA:
- There are no contribution limits, although it is perhaps more motivating to have a target to reach. Pray for what this target should be.
- It is not tax-sheltered for you unless your gift is an approved “charitable contribution”, which may be tax-deductible. I don’t take particular joy in giving to organizations, so for me, this is always post-tax (roth style).
- It is “tax-sheltered” for the receiver of your gift, and you don’t pay any additional tax as long as you aren’t exceeding the IRA tax-free gift limit, and you probably aren’t (https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes). But think about it. When a person earns money through a job, they pay taxes on those earnings. So they are actually working more than their hourly wage in order to receive the paycheck they do because they have to pay taxes on their income. When they receive a monetary gift, it is “tax-free” for them, because even if they had to work X number of hours to earn that at their hourly wage, they would have to work even more to net that amount after taxes, so your gift is worth even more to somebody than its dollar value may suggest.
Long ago I bought some food for my church’s food pantry and I realized that it was ridiculous to buy the cheapest cans of food when those were not the cans that I or my family ate. I was challenged to buy for others what I would buy for myself, so I did. That idea has stuck ever since. If I donate to a school drive, I’m not going to buy the shitty materials, I’m going to buy the good stuff I would buy for myself. (for the record, I can’t say I contribute to school drives). Why should this be different for anything else?
What the G-IRA does is help you look past the expense of a thing. It’s easy to cut corners because “it’s a gift”, and of course you will have things you want to buy for yourself. But when you are shooting for a target, it doesn’t really matter that you may be spending a lot extra on something of quality for another person because your goal is to give $X in the first place. So as long as the gift is helping you reach your giving goal, who cares about the extra expense?
I mean, I don’t consider myself a nature junkie, but I do enjoy hiking, snowshoeing, and camping. Let’s say you live in Colorado and someone new to your church has moved from out-of-state and has no gear for these things but wants to start. What if you could just give them a $500 REI gift card? “Here, punk, getcha some hiking boots, socks, a base layer, and a good jacket to get started”. How cool would that be?
Anyway, you get the point. There’s not much more to say about this. Especially if you are in a situation to give, you should think about this, as I think some incredible things would happen in the church if people did.