Charitably inclined clients often ask their financial advisors: what percentage of my assets should I be giving away each year? The simple answer: that there is no “one-size-fits-all” number, and personal choice ultimately dictates the outcome. Just as there are multiple strategies for how to donate your assets, including the type of assets and the best timing for gifting, every family has unique reasons for how much they are prepared to give.
- Some families choose to “tithe,” giving away up to 10% of their annual income to charity, often tied to a religious-based directive.
- From a financial planning perspective, rather than arriving at a fixed annual percentage, some donors find it advantageous to “bunch” their donations into a vehicle like a Donor Advised Fund in one or more higher-income years–receiving the tax deduction at the time of this consolidated gift–and then slowly grant those dollars out to one or more nonprofits over multiple years.
Benchmarking data points to a range of figures for how much is given annually:
- The Economist cites a 2020 study of 10,665 American households from 2001-2017, concluding that most gave about 1.5% of their annual income. With respect to the extremely wealthy, the researchers accessed giving data from the IRS to determine that earners in the income range of $5M to $10M donated 4.3% annually, on average. Donors making $10M a year and higher averaged 8.6% of their income.
- A MarketWatch story, citing personal finance website Financial Samurai, offers 3-5% as the average amount of giving for American families, across a variety of income levels. The same MarketWatch article cites Stacy Palmer, the longtime editor of the Chronicle of Philanthropy, as suggesting that a 2% figure is a good starting point for those who are embarking on a targeted annual giving goal.
Ultimately, an annual giving percentage will be one that works well with your short and long-term charitable goals. Moneta helps our clients to build financial plans that consider sustainable generosity. Reach out when we can be a resource.
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