They say birthdays get less exciting as we get older, however, there are important ages to keep in mind as you plan for retirement.
Age 50
Starting at age 50, you can take advantage of key tax breaks by putting away more money in your tax-deferred retirement accounts. Workers who are 50 or older are allowed to make catch-up contributions to their 401(k)s and IRAs. That means those 50 and older can save an additional $6,500 in a 401(k) for a total of $26,000 in 2020 and 2021. They can also put an extra $1,000 in an IRA per year for a total of $7,000 in 2020 and 2021.
Not only do catch-up contributions allow you to put more money away for retirement, you are also reducing your taxable income for the year. The money you put into these accounts grows tax-deferred until you withdraw it in retirement. Besides the tax benefits, maxing out your contributions is an important part of building your nest egg and increasing your retirement security.
Age 59½
The next age you want to pay attention to is a bit of a strange one because it falls in between birthdays. You can start withdrawing money from your retirement accounts at age 59½ without paying a 10% early withdrawal penalty.
There are certain circumstances in which you can avoid paying an early withdrawal penalty before this age. If you have any questions about this, you should talk to a financial adviser. The consequences of withdrawing from your accounts early can be detrimental to your retirement because you rob yourself of future growth.
Sponsored Content
Age 62
You are eligible to start receiving Social Security benefits at age 62. Many people dream of an early retirement, however, if you begin collecting your benefits at age 62, your monthly check will be permanently reduced by as much as 30%. Most seniors are advised to wait until they reach their full retirement age (if not longer) before collecting Social Security checks. However, if you need the income from your Social Security benefits, it might make sense to file for benefits as soon as you are able.
Sponsored Content
Age 66/67
The next age range to note is your full retirement age for Social Security benefits. People who wait to claim until full retirement age will receive their full benefit. If you can hold off taking benefits beyond that, you can earn delayed retirement credits, increasing your benefit even further. The longer you wait, the bigger your benefit will grow. For every year you wait to claim beyond your full retirement age, your benefit increases by as much as 8% each year.
Social Security is complicated. It’s important you have a plan for retirement and a strategy for tapping into your benefits. Before you even turn 62, take the time to sit down with your financial adviser to set a strategy for claiming Social Security.
Sponsored Content
Age 70
If you reach age 70 and haven’t dipped into Social Security yet, you’re in luck! Your monthly benefit is the most it can be if you wait to claim at age 70. Claiming after you turn 70 doesn’t increase your benefits any further, so there’s no reason to wait beyond this age.
Again, just because you can wait until age 70 doesn’t mean it’s the best option. So much of your Social Security strategy depends on things like how long you think you will live and whether you or your spouse plan to file for spousal benefits.
Sponsored Content
Age 72
One of the trickier things to manage when it comes to planning for retirement is your required minimum distributions (or RMDs). The SECURE Act changed the age at which you are required to start withdrawing money from your tax-deferred retirement accounts from age 70½ to age 72. It’s critical you understand the penalties associated with missing a withdrawal. Understanding when to take your RMDs and planning for the income is key.
Be aware of one common misunderstanding regarding the RMD age change: The SECURE Act did not change the age at which you can make a qualified charitable distribution (or QCD). You can transfer money directly from your traditional IRA to a qualified charity at age 70½.
Now, more than ever, it’s important to have a plan in place so you can be prepared for anything that may come your way in retirement. Understand the best time to start receiving Social Security, how you will use your RMDs and where your income will come from throughout retirement. It pays to have a financial adviser on your side to help you create a comprehensive plan that outlines your retirement goals and the path you need to take to meet them.
Sponsored Content
-
Ten Cheapest Places to Live in TexasProperty Tax Looking for a cheap place to live in Texas? Look no further. These counties have the lowest property tax bills in the Lone Star State.
-
AI Is Missing the Wisdom of Older Adults: What It Means for YouAI will increasingly affect your healthcare and finances, but young workers are primarily designing the systems and getting most of the jobs.
-
The Three C's to Financial Success: A Financial Planner's Guide to Build WealthConsistency, commitment and confidence in your chosen strategy are more critical to your financial success than finding the 'perfect' financial plan.
-
A Financial Adviser's Guide to Solving Your Retirement Puzzle: Five Key PiecesIf retirement's a puzzle you're struggling with, try answering these five questions. The answers will guide you toward a solution.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or RelocateHomeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
-
A Financial Expert's Tips for Lending Money to Family and FriendsWhat starts as a lifeline can turn into a minefield if the borrower ghosts the lender. Following these three steps can help you avoid family feuds over funds.
-
What the HECM? Combine It With a QLAC and See What HappensCombining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden RisksPotential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid OffLife insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.
