Fidelity Donor Advised Strategy Feedback Request

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TexMexIndex
Posts: 34
Joined: Wed Mar 28, 2018 12:38 pm

Fidelity Donor Advised Strategy Feedback Request

Post by TexMexIndex » Wed Jun 05, 2019 3:49 am

I have wanted to open up a Donor Advised Fund and thanks to a 5k gift from a generous family member,
now is the time. My plan is put additional $ in per paycheck (tithing) and donate that annually.

So in the next twelve months I will add 6K to the 5K I initially put in.

1. Investment Strategy

Looking at investment options, I think I may just put it all in a US Total Stock Market Index.
I'm OK with volatility/risk, am looking for growth.
https://www.fidelitycharitable.org/inve ... ance.shtml
https://www.fidelitycharitable.org/givi ... osts.shtml

For those with a DAF, how do you allocate?

2. Withdrawal Strategy

My plan is to withdraw what I put in every year, and an additional 50% of increase the years the fund
is a net positive. For example say 12 months from now the 5k plus the other money sitting in the account
annual before donation returns about 8% after fees and the account balance is at $5640. I would donate
$320. I understand not withdrawing would help it grow but want to help a bit in the present, thought is
to have the family decide each year, be involved in picking the nonprofit.


Would enjoy any feedback, especially for those who have had a donor advised fund for a while.

mchampse
Posts: 267
Joined: Mon Feb 26, 2007 1:45 am

Re: Fidelity Donor Advised Strategy Feedback Request

Post by mchampse » Wed Jun 05, 2019 12:39 pm

If you are putting in $6k per year and immediately donating, I would put that portion of the money into a money market fund.

Also, consider not using a DAF and putting the $5k you received into a regular brokerage account. You wouldn’t have to pay the $100 fee to Fidelity Charitable. You would also have the ability to donate appreciated stock/MFs to the charities which is more advantageous than donating cash as you get a deduction on the appreciated amount without having to pay capital gains taxes.

Putting the $5k into a DAF now would get you a tax deduction this year for that amount, though donating appreciated stock would get you smaller tax deductions over time. So it also depends on if the larger deduction up front is important to you.

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Stinky
Posts: 2454
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Fidelity Donor Advised Strategy Feedback Request

Post by Stinky » Wed Jun 05, 2019 1:08 pm

I would also consider not using a DAF at this time. The minimum fee is $100 annually, so that would be a 2% fee off the top, which is a pretty heavy load to bear.

I agree with mchampse on (a) keeping a good part of the money in a money market fund, and (b) putting any "longer-term" amounts that you'll be ultimately donating to charities in a regular brokerage account. You'll pay a small tax on dividends and realized gains in the brokerage account, but probably less than the $100 annual fee.

As the amount that you have in your brokerage account grows, you could consider opening up a DAF at that time, and donating the shares from the brokerage account to avoid capital gains taxes on any unrealized gains.
It's a GREAT day to be alive - Travis Tritt

drzzzzz
Posts: 434
Joined: Sat Sep 22, 2012 9:56 pm

Re: Fidelity Donor Advised Strategy Feedback Request

Post by drzzzzz » Wed Jun 05, 2019 1:10 pm

While the amount you are talking about is a nice sum to donate, I am not sure a DAF is the best vehicle for you unless it puts you over the threshold for itemizing deductions with other deductions that you might have. As someone else has mentioned there will be a fee on the DAF and you also can only give a minimum of $50 donation whereas you might want to donate a smaller amount with a check. Lastly, the idea of using appreciated assets to donate directly to a charity or to donate those appreciated assets to the DAF should be considered since you get the full amount as a deduction for any stocks or mutual funds that have appreciated and you won't have to pay taxes on that appreciation.

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Wiggums
Posts: 1932
Joined: Thu Jan 31, 2019 8:02 am

Re: Fidelity Donor Advised Strategy Feedback Request

Post by Wiggums » Wed Jun 05, 2019 1:15 pm

Stinky wrote:
Wed Jun 05, 2019 1:08 pm
I would also consider not using a DAF at this time. The minimum fee is $100 annually, so that would be a 2% fee off the top, which is a pretty heavy load to bear.

I agree with mchampse on (a) keeping a good part of the money in a money market fund, and (b) putting any "longer-term" amounts that you'll be ultimately donating to charities in a regular brokerage account. You'll pay a small tax on dividends and realized gains in the brokerage account, but probably less than the $100 annual fee.

As the amount that you have in your brokerage account grows, you could consider opening up a DAF at that time, and donating the shares from the brokerage account to avoid capital gains taxes on any unrealized gains.
+1

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