A 75-year-old widow with $1.8 million in savings, no children, and a desire to support her alma mater faces a challenge familiar to many affluent retirees: generating dependable income, reducing taxes, and creating a charitable legacy without managing a complicated strategy. A Charitable Gift Annuity (CGA) can accomplish all three in a single transaction, and today’s interest-rate environment has made the economics particularly attractive for older donors.
Questions like this surface regularly among retirement and personal-finance communities. Many retirees discover that traditional annuities, charitable giving vehicles, and income-planning tools each solve only part of the problem. A CGA stands out because it combines a lifetime income stream, an immediate charitable tax deduction, and a future gift to a nonprofit in one straightforward agreement.
The setup in plain English
- Donor: 75, widowed, single filer, no children
- Investable assets: $1.8 million, mostly taxable brokerage and a traditional IRA
- Core issue: needs steady income, hates market volatility, wants a legacy gift to her university
- Plan: fund a $720,000 single-life CGA with the university
Why the math works at her age
The American Council on Gift Annuities publishes suggested payout rates that most issuing charities follow. For a 75-year-old donor, the current single-life rate is 7.0%. On a $720,000 gift, that translates into $50,400 a year, or $4,200 a month, for life. The payment is fixed and does not fluctuate with stock or bond market performance.
The tax treatment is one of the main advantages of a CGA. A portion of each payment is generally treated as a tax-free return of principal based on the donor’s actuarial life expectancy, while the remainder is taxed as ordinary income. The donor also receives an immediate charitable deduction based on the projected value of the future gift to the charity. With interest rates remaining elevated, current IRS valuation assumptions can produce deductions in the neighborhood of $230,000 to $250,000 on a $720,000 gift, making today’s environment more favorable than periods when rates were substantially lower.
The real tension: fixed income meets rising prices
$4,200 a month buys less every year. Core PCE, the Fed’s preferred inflation gauge, rose from 125.79 in May 2025 to 129.63 in April 2026, still running above the 2% Fed target. A CGA payment is nominal and never adjusts. The right way to think about it: the CGA is the predictable floor, and the remaining roughly $1.08 million in her portfolio is the inflation hedge.
Three paths worth comparing
- Fund the CGA with appreciated taxable stock. She offloads embedded capital gains, gets the charitable deduction, and converts a non-yielding position into $50,400 of annual income. The deduction can offset other ordinary income up to 30% of AGI, with a five-year carryforward.
- Use a SECURE 2.0 QCD-funded CGA from the IRA. In 2026, a donor 70.5 or older can make a one-time QCD of up to $55,000 directly into a CGA. The QCD counts toward her RMD and is excluded from income. The catch: the payments are 100% ordinary income (no exclusion ratio), and no separate charitable deduction.
- Buy a commercial SPIA instead. A single-premium immediate annuity from a top-rated insurer typically pays a slightly higher monthly check at age 75, but provides zero charitable deduction and zero residual gift.
What to do this week
Request a written CGA illustration from the university’s gift-planning office and a comparable SPIA quote from two A+ rated insurers. Compare monthly payment, exclusion ratio, and total after-tax income over a 15-year horizon. Confirm her state’s tax treatment of the income portion, since a handful of states tax CGA income differently. The common mistake to avoid: funding the full $720,000 in one calendar year and wasting deduction capacity above the 30% AGI ceiling. Splitting the gift across two tax years often captures more of the deduction.
If her estate is likely to approach the federal exemption (currently above $13 million per individual), the interplay between the CGA deduction, remaining IRA, and a residuary bequest justifies a fee-only estate attorney before signing. The contract is irrevocable once funded.
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