The primary factor in reducing the rates is a lower yield on the ten-year Treasury bond. During the past year, the yield changed from 3.3% in January to below 2.0% in October. With the ongoing issues over the Euro, there is a continued cash "flight to safety" of Treasury bonds. This may lead to even lower Treasury bond yields by late 2012.
Because the ACGA gift annuity reserve portfolio assumes 40% equities, 55% bonds or fixed income and 5% cash, a reduction in bond yields changes the total assumed return. The new assumed return will be 4.25% with a 1% load, for a net return of 3.25%.
The new rates will pass the Sec. 514(c)(5) minimum 10% charitable deduction test. The target minimum deduction is at least 20%. One life rates are capped at 9.0% at age 90. The rates above age 80 are adjusted to provide a greater margin of safety.
Editor's Note: In a time of great changes in interest rates, the ACGA Board has been responsible in updating rates. While everyone hopes that rates will be stable for the future, it is important for both donors and charities (who will receive the residuum) that gift annuity rates are fair and realistic. With the continued low CD rates, 2012 gift annuities for our senior friends are extremely attractive.