The Psychology of Generosity

As the year winds down, generosity tends to take center stage. The holidays remind us to pause, reflect, and share what we have with others. But giving is more than a seasonal tradition; it’s an experience that benefits both the recipient and the giver. Research shows that acts of generosity can boost happiness, reduce stress, and even strengthen financial confidence by creating a clearer sense of purpose.

The Science Behind the “Warm Glow”

Neuroscientists have found that giving activates the same parts of the brain linked to pleasure and reward. It’s the so-called “helper’s high,” a release of dopamine that leaves you feeling more connected and fulfilled. Studies also show that people who give regularly tend to report higher levels of happiness and lower levels of stress.

Behavioral economists link this to the concept of reciprocal altruism. We are wired to feel satisfaction when our actions benefit others, especially when we can see or understand the impact. Giving creates a sense of control and purpose, both of which are important during retirement when traditional work structures fall away.

To illustrate, imagine a retired engineer who funds small scholarships each year for local students pursuing science degrees. The ability to meet recipients and see the results of his giving reinforces the emotional connection and creates a deeper sense of fulfillment.

Why Intentional Giving Feels Better

Not all giving feels the same. Writing a quick check at the end of the year might help a cause, but planning your giving ahead of time can make it far more meaningful. By aligning your charitable choices with your values, you reinforce your sense of identity and purpose.

This is where financial planning comes in. Building giving into your plan, whether through donor-advised funds, charitable trusts, or qualified charitable distributions (QCDs), allows you to make a larger and more consistent impact. It also helps you see how your generosity fits into your broader goals for family, legacy, and community.

For example, a couple who regularly donates to several charities might choose to consolidate those gifts through a donor-advised fund. Doing so can simplify recordkeeping, allow them to make a single contribution of appreciated stock, and provide flexibility to recommend grants over time.

Turning Feel-Good Moments Into Financial Wins

Good feelings aside, thoughtful charitable planning can also bring tangible benefits. In 2025, individuals can deduct up to 60% of adjusted gross income for cash gifts to qualified public charities, and up to 30% of AGI for gifts of appreciated assets such as stocks or mutual funds.

For retirees over age 70½, QCDs remain a standout strategy. You can give up to $108,000 per person directly from an IRA to a qualified charity in 2025 ($115,000 per person in 2026). The gift counts toward your required minimum distribution but is excluded from taxable income, helping manage Medicare premiums and reducing the portion of Social Security benefits subject to tax.

For example, a retiree who doesn’t need all of their IRA withdrawal for living expenses, they can direct a portion of the RMD straight to a favorite nonprofit. The organization receives the full benefit, while the retiree lowers taxable income in a simple, compliant way.

The Ripple Effect of Generosity

When giving becomes a habit, it does more than reduce taxes or boost mood. It shapes how you view money and purpose. Many retirees find that integrating philanthropy into their financial plan provides a sense of ongoing relevance and connection. Children and grandchildren who see these actions often continue the tradition, creating a family culture of generosity.

To get loved ones more involved in your giving plan, a family might hold an annual “giving meeting,” where each member suggests a charity to support. This creates an opportunity to share values, encourage participation, and pass along lessons about responsible giving.

Giving feels good for a reason. It reminds us that our financial resources can be tools for meaning, not just maintenance. When approached thoughtfully, generosity can strengthen both emotional well-being and financial balance. This season, consider how your charitable efforts, big or small, can make life richer in every sense of the word.