Money Meets Medicine Podcast
Charitable Giving for Physicians
Does tithing or charitable giving play a part in your personal finances? Should it? As usual, we’re not shying away from taking a deep dive into a very personal topic. Personal finance is personal, maybe never more so than when it comes to deciding how you want to give back.
In tackling this topic, we wanted to acknowledge the two main reasons you may be considering your options for charitable giving, especially as a high-earning physician.
One is that you may have religious convictions that make you feel more inclined to give. Even if you don’t hold to the same belief system that we do – specifically around tithing and the historical background of that concept – giving to your community is very valuable. Not just for the recipient, but for you, the giver.
This leads us into reason two, which is that giving money (or other valuable resources) and helping others has been shown to increase long-term satisfaction and fulfillment in your life.
There’s also a practical side of financial charitable giving to consider, which are the tax advantages you can use to create the most bang for your buck – literally.
Charitable giving as part of your belief system
We grew up in Christian households that instilled in us the importance of giving back to support our communities and our institutions that have given to and supported us in the past. It’s hard to say now if we would otherwise have as strong of a conviction to give as we do. But giving is something we value. Not only does it bring us happiness, but it’s part of each of our belief systems and who we are. Tithing feels as necessary as paying the mortgage or phone bill.
But your belief system certainly doesn’t have to be particularly religious to want to pay forward some of the abundance you’ve received because of medicine.
Considering your values in charitable giving
What really matters when it comes to giving is, does it align with your values? Personal finance is personal, and no two people are going to use the same system or approach.
Charitable giving isn’t only defined by giving to traditional institutions like nonprofits or religious organizations. Maybe you want to set aside funds to help your niece or nephew pay for college. Your best friend wants to start a business and could use some start-up support, so maybe you want to set aside money to help them fulfill their dream. Maybe you want to give back to your medical school for the impact it made on your life. Whatever the case may be, it helps to figure out your best options for giving and how to use that money wisely so it can have the most influence where you want it to.
The practical plus side of charitable giving: tax advantages
One of the questions I get most is, do you give pre-tax or post tax?
When I was a resident and didn’t have as many resources, I gave post-tax. Now as an attending, I give pre-tax. The reason for the change is that I realized that I don’t plan to stop giving in retirement. So I thought, if I’m giving from pre-tax, then taking home my money and still giving in retirement from that cumulative post-tax amount, it’s like double tithing. By going post-tax, in retirement, I’m giving from funds that have grown. So I’d actually contribute more money towards charitable giving than I would’ve if I went pre-tax during my income earning years.
One of the other arguments for post-tax giving that matters in the personal finance space is that if you give charitably pre-tax, it will delay your journey to financial independence. There are good arguments from both standpoints of pre-tax and post-tax, but again, personal finance is personal and it’s up to you to decide your best way forward.
Donor advised funds
One way you could explore charitable giving in a structured, tax-advantageous way is through donor advised funds. In the same way you’d contribute to a retirement account at work, you can call up your Vanguard or your Fidelity, etc. and ask for a donor advised fund. You would define how much and how often you want to give (with an option to have it deducted from your paycheck) and put the money in this account. And because you don’t have to give the money in the same year that you contribute to the donor advised fund, you give your money a chance to grow.
So let’s say the market is earning an average of 10% per year. If you contribute $10,000 for 10 years, instead of just having the $100,000 in total that you contributed, maybe it’s grown to $150,000. Then that’s what you’re able to give to your chosen designation.
The tax benefit comes upfront, because from a tax standpoint each $10,000 contribution is considered already given. It counts as a deduction in that tax year because once the money goes into this account, you don’t get it back. It’s as good as given, and it’ll continue to grow until it goes to a charity of your choosing.
Charitable giving isn’t limited to monetary donations
There’s more than one way to give back. Some people give their time, some people give their talents, and yes, some people do give their money. Maybe you’re in a position where you want to be of service in some way but don’t feel, for whatever reason, that money is the answer. Maybe tithing or financial giving isn’t in your value system. Just remember that you can still volunteer your talents, give of your time and expertise in mentorship, or leverage the skillset you’ve acquired through medicine in other ways to give back. It all matters, and it all creates a positive impact in the world.
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