Gift annuity rate increase means more retirement income

Wednesday, August 3, 2022 - 10:18

The American Council on Gift Annuities (ACGA) increased its recommended annuity rates effective July 1.  For most annuitants, age 70 or older, the new rates are .4%-.6% higher than before. This good news gives you a reason to connect with clients, especially if they want to create fixed income for retirement while planning future gifts.

Gift Annuities deductible portion increases

Increasing interest rates also mean the tax deduction for creating a gift is better than in previous months, despite an increase in the payout.

Record low IRS discount rates in recent years reduced the deductible portion of gift annuities, making them less attractive to donors. However, now as the discount rate has risen the deductible portion of creating a gift annuity increased as well.

ACGA also increased the compound interest factor for deferred gift annuity rates from 2.75% to 3.5% for all deferral periods, so the longer the deferral period, the greater the increase will be from the old rate to the new.  

This chart illustrates the increases for a $10,000 Immediate Gift Annuity. February deductions are based on February IRS discount rate of 1.6%. July deductions are based on July discount rate of 3.6%. 

Comparison of Current and New ACGA Rates, Source: PG Cal.U.Letter

The combination of higher rates and higher deductions will make gift annuities more attractive to your clients who seek stability in retirement.