Ask Liz Weston

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Q&A

Q&A: Can a QCD be made to a donor advised fund?

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Dear Liz: I read your column about qualified charitable distributions, where you can send a required minimum distribution to a charity so the RMD won’t be taxed. I have a donor-advised fund and would like to know if I can put my RMD into that, rather than send it directly to a charity. The funds in my donor-advised fund eventually get distributed to charities.

Answer: Sorry, but qualified charitable distributions can’t be made to a donor-advised fund. The RMD must go directly from your IRA to a qualifying charity to avoid taxation.

To recap, QCDs are available to people 70½ who can contribute IRA funds to charity (up to $111,000 in 2026). The distribution is not included in the donor’s taxable income and can count toward any required minimum distributions.

Q&A: Why you should file a tax return, even if you don’t have to

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Dear Liz: Here is some further consideration in the discussion about older people not filing tax returns. I am old, live in Maine, have a low income but high housing costs. In 2024 I had zero dollars withheld to the state, yet received a $2,210 credit from the state. There was $2,000 for a “Property Tax Fairness Credit” that is available to those who pay high rent or high property tax. The other $210 was a “Sales Tax Fairness Credit.” You don’t have to be old to qualify for these credits. The relief that these credits provide is well worth the effort of filing tax returns.

Answer: People 65 and older typically don’t have to file federal tax returns if their incomes are under certain limits ($17,750 for singles and $34,700 for married filing jointly in 2025). But there are a number of reasons to file tax returns even when they’re not strictly required, including claiming tax credits, getting back income tax withheld from paychecks or retirement accounts, and getting access to any future government stimulus payments that might be offered.

Q&A: Should I delay my pension payments as long as possible?

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Dear Liz: I work for a local government and my job offers a pension as well as a 457 deferred compensation plan. If I delay starting my pension, will it have the same 8% growth that Social Security offers? Is my 457(b) plan much better than 401(k)?

Answer: Government pensions and Social Security both offer guaranteed income for life, but use different formulas for determining benefits.

Social Security is generally based on the worker’s 35 highest-earning years. Recipients can earn an 8% annual boost in their retirement benefit for each year they delay starting after their full retirement age, until benefits max out at age 70.

Pensions, meanwhile, are typically based on a combination of age, final salary and years of service. Delaying retirement typically does increase your benefit, but how much depends on the details of your plan. Many plans offer tools for estimating your future benefits, or you can contact your human resources department.

Your 457(b) plan has much in common with a 401(k). Both allow workers to contribute pretax money through payroll deductions up to certain limits ($24,500 in 2026, with an additional $8,000 catch-up contribution for those 50 and older, plus an additional $11,250 for those 60 to 63). The amount you ultimately get in retirement isn’t guaranteed but depends on how much you contribute and how the investments you choose perform over time.

A major difference between the two types of plans: 401(k)s typically offer some kind of matching funds, while 457(b)s often do not. On the other hand, early withdrawals from a 401(k) are usually penalized, while you can generally withdraw money from a 457(b) penalty-free after you leave your job.

Q&A: How disability income affects survivor benefits

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Dear Liz: My wife and I are essentially the same age (62), high school sweethearts married 44 years. She had a severe stroke at 57 and I became her full-time caregiver. She began receiving Social Security disability benefits about nine months later, at 58. I began taking my Social Security retirement benefits this year. I had a heart attack at 51 and am doubtful I’ll live much past 75 or so. My wife was always the higher-earning spouse so her benefits (equivalent to retiring at 70) are double mine.

First, if my wife passes before I do (which is a toss-up), am I entitled to survivor benefits? Secondly, will my Social Security benefits simply be replaced with the amount my wife currently receives?

Answer: When your wife reaches her full retirement age of 67, her disability benefit will become her retirement benefit. You referenced age 70, when benefits typically max out, but that’s only if they haven’t been started yet.

When one of you dies, the larger of your two benefits will become the survivor’s benefit. The smaller benefit will end.

Q&A: Was it a mistake to incur a large tax bill?

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Dear Liz: We are a retired couple in our late 70s. I worked as a carpenter and my wife worked as a nurse. We saved and invested for the long haul with a well-known discount brokerage. Last summer, we were wooed by another financial services firm with a “much better idea.” Our combined portfolio at the time was $1,985,000. We transferred our holdings, including $340,000 in a taxable account.

The transfer triggered a capital gain of $184,000 as the new company sold the old funds and reinvested the money according to their plan. This caused us to owe about $50,000 in income tax this year rather than breaking even or receiving a refund. Our holdings have grown to $2,013,119 after our 2026 required minimum distributions have been taken. Was this a good move given the large tax bill? Our tax accountant is very critical of the sale of these funds.

Answer: Your accountant may not be in the best position to evaluate whether this was the right move for you.

Tax pros are typically focused on saving their clients money. That often means delaying or avoiding moves that could trigger capital gains taxes. Sometimes, though, such moves are necessary to avoid even bigger financial costs down the road.

The stock market gains of recent years mean that many people have portfolios that are now too heavily invested in stocks, particularly if they haven’t been regularly rebalancing their investment mix. These stock-heavy portfolios can leave people painfully exposed to downturns.

I redacted the names of the firms, but both companies you mentioned in your letter have good reputations. Your previous brokerage caters to do-it-yourself investors who want to minimize fees, while your new one provides fiduciary advice, meaning that they’re required to put their clients’ best interests first. It’s easy to imagine you investing for decades on your own without an advisor’s help or appropriate rebalancing; the new firm sees how risky your portfolio has become and diversifies it after careful discussions with you about your age, situation and goals.

Imagination is not reality, though, and the most concerning part of your letter is your vagueness about why you moved your money. You should be able to articulate in basic terms why this transfer made sense. “Our portfolio was too risky” or “I had too many of the same type of stocks” or “I realized I needed help” are all appropriate reasons. “A much better idea” is not.

The right move now might be to get a second opinion from a fee-only financial planner. Someone who charges by the hour could review your portfolio and let you know if you’re now on the right track. You can get referrals from the Garrett Planning Network at https://garrettplanningnetwork.com/.

Q&A: Is there a way to avoid taxes on RMDs?

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Dear Liz: I have read advice on how to minimize taxes for people who potentially could have higher incomes and taxes after age 70 when they have pensions, Social Security payments and retirement account RMDs. The most common strategy seems to be doing Roth conversions during the later stages of employment, particularly if one spouse retires before the other so family income decreases.

However, I have not read good advice for older people when this problem has already started (other than noting that one way to avoid paying taxes is to donate the RMD funds). Is there any strategy for people who already have this triple income to reduce paying taxes and high Medicare premiums? We lived below our means for our working lives to save for retirement, but now see our savings dissipate due to the taxes and Medicare premiums.

Answer: Your situation illustrates why it’s so important to get good tax advice years before RMDs start, because you have fewer options after that point.

The alternative you mentioned is called a qualified charitable distribution. QCDs allow you to transfer a certain amount (up to $111,000 per individual in 2026) directly from your IRA to a charity. The transfer can satisfy your RMD requirement, but the amount is not included in your taxable income.

Another option is buying a qualified longevity annuity contract, or QLAC. These deferred income annuities start paying out guaranteed income for life once you’ve reached a certain age (up to age 85). You can use up to a certain lifetime amount of IRA money ($210,000 per individual in 2026) to purchase the contract. That money is excluded from RMD calculations until payouts begin.

As with any annuity, you’ll want to research your options, understand the downsides — including lack of liquidity, because the amount you spend typically can’t be recovered — and seek out fiduciary advice before you proceed.