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This 401(k) Proposal Could Give Retirees an Easier Way to Donate to Charity
By Adam Hardy MONEY RESEARCH COLLECTIVE
Lawmakers want retirees to donate directly from 401(k)s while avoiding taxes and extra paperwork.
A bipartisan group of lawmakers wants to make it easier for retirees to donate to their favorite causes directly from their nest eggs.
The proposal, dubbed the Charity Parity Act, seeks to expand existing rules to allow older Americans to donate using funds from their 401(k)s or similar employer-sponsored retirement plans.
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Currently, retirement account-related donations, known as qualified charity distributions, can be made only via taxable individual retirement accounts (IRAs). So if retirees would like to use their retirement savings for a donation, they must first roll the funds over into an IRA, triggering fees and paperwork.
“This legislation makes charitable giving more accessible and equitable for retirees,” Mark Schoeberl, an executive vice president at the nonprofit American Heart Association, or AHA, said in a news release.
The AHA is one of a spate of nonprofit organizations that support the change. Other backers include the American Retirement Association, the American Cancer Society, the United Way, the Salvation Army and more.
Building on SECURE 2.0
The SECURE 2.0 Act, passed in 2022, enacted major retirement savings reforms that make it easier for millions of workers to save for retirement while giving retirees more flexibility with their savings.
The plan made two key changes that affect qualified charity distributions: First, it set the annual charity distribution limit to adjust based on inflation. For 2026, the limit is $111,000. The second relevant change was to the age at which retirement savers are required to take out mandatory distributions from their retirement accounts. These mandatory withdrawals are called required minimum distributions, or RMDs, and they generally start at age 73 (unless the saver is still working).
In 2033, the RMD age is moving up to 75.
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RMDs are particularly relevant to charitable donations from retirement accounts because those donations can satisfy the RMD rule and help retirees avoid, in some cases, a major tax bill.
For instance, if a retiree is required to take a $20,000 distribution from their IRA, that money is normally considered taxable income, which could push them into a higher tax bracket, hike Medicare premiums or trigger increased Social Security taxes. Instead, some wealthier retirees whose basic needs are already met by other income sources choose to donate the RMD money to a qualifying charity to skirt the tax bill while helping a cause they care about.
For now, that strategy works only for RMDs coming from IRAs, but the SECURE 2.0 changes helped supercharge the tax-efficient donation method nonetheless. In 2024, qualified charitable giving through IRAs increased 56%, data shows, and another 47% the following year.
The bipartisan Charity Parity proposal intends to build on that momentum by extending those rules to 401(k) plans — and it’s got major support, including two co-sponsoring senators who sit on the Senate Finance Committee.
Still, the proposal is far from guaranteed, and it’s not clear when the bill will make its way through the House and Senate committees and come up for a vote. But it’s got supporters excited.
According to Brian Graff, CEO of the American Retirement Association, the proposal “builds on the success of SECURE 2.0 by ensuring retirement savers are treated fairly, regardless of where they hold their assets.”
“By reducing administrative burdens,” he added, “this legislation can help encourage greater charitable giving while strengthening retirement security.”
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Adam Hardy is Money's lead data journalist. He writes news and feature stories aimed at helping everyday people manage their finances. He joined Money full-time in 2021 but has covered personal finance and economic topics since 2018. Previously, he worked for Forbes Advisor, The Penny Hoarder and Creative Loafing. In addition to those outlets, Adam’s work has been featured in a variety of local, national and international publications, including the Asia Times, Business Insider, Las Vegas Review-Journal, Yahoo! Finance, Nasdaq and several others. Adam graduated with a bachelor’s degree from the University of South Florida, where he studied magazine journalism and sociology. As a first-generation college graduate from a low-income, single-parent household, Adam understands firsthand the financial barriers that plague low-income Americans. His reporting aims to illuminate these issues. Since joining Money, Adam has already written over 500 articles, including a cover story on financial surveillance, a profile of Director Rohit Chopra of the Consumer Financial Protection Bureau and an investigation into flexible spending accounts, which found that workers forfeit billions of dollars annually through the workplace plans. He has also led data analysis on several of Money’s marquee rankings, including Best Hospitals, Best Credit Cards, Best Places to Live and others. In 2025, Adam was named a Goldschmidt Data Journalism Fellow by the Society for Advancing Business Editing and Writing (SABEW). As part of the fellowship, he received hands-on training from SABEW, the U.S. Census, U.S. Federal Reserve Bank, Bureau of Labor Statistics and other federal government agencies in Washington, D.C. Adam also holds a multimedia storytelling certificate from Poynter’s News University and a data journalism certificate from the Investigative Reporters and Editors at the University of Missouri. In 2017, he received an English teaching certification from the University of Cambridge, which he utilized during his time in Seoul, South Korea. There, he taught students of all ages, from 5 to 65, and worked with North Korean refugees who were resettling in the area. Now, Adam lives in St. Petersburg, Florida, with his pup Bambi. He is a card-carrying shuffleboard club member.