According to Registered Investment Advisor, Kelly Campbell, who writes for U.S. News & World Report Money, the planning process may start long before retirement, but it continues right through the retirement years. Obviously, any retirement plan will require adjustments to keep things on track. Mr. Campbell writes that among many important factors to be considered, age is one that can guide retirees toward maximizing certain benefits and helping to avoid costly mistakes.
In an article titled “7 retirement milestones you need to know”, published recently on MSN.com’s Money website, Campbell outlines the impact of paying attention to certain age milestones. The full article can be found here. The following is a brief recap of the age milestones mentioned by Mr. Campbell.
Age 50 – Individuals become eligible for "catch up" provisions, which allow an extra $1,000 contribution to IRAs and Roth IRAs annually. For 401k accounts, the provision allows even larger increased contributions. This can help future retirees catch up if they hadn’t started saving as early as they would have liked.
Age 59½ - Individuals may avoid the 10 percent "early withdrawal penalty" if an emergency withdrawal becomes necessary. Any applicable income taxes are still assessed.
Age 62 – Individuals become eligible to file for Social Security Benefits, but there are many things to consider. Filing at age 62 will reduce benefits. If employment income continues, Social Security benefits may be withheld and taxed.
Age 65 – Medicare eligibility begins, possibly eliminating the need for employer-sponsored or private health insurance plans. There is a 7-month enrollment window, beginning three months before the month of the 65th birthday, ending three months after that month, to avoid paying a potentially higher premium.
Age 66 & 67 – At retirement age, eligibility for full Social Security benefits begins. For most baby boomers, this will be 66 or 67. This milestone age will increase for following generations. Spousal benefits are also affected by the decision to receive benefits early.
Age 70 – For every year that filing for Social Security benefits is delayed after retirement age, individuals receive a credit, which is an 8 percent annual increase to accumulated Social Security benefits, up until age 70, when there isn’t any more advantage to delay filing for benefits.
Age 70½ - Required Minimum Distributions (RMD) from qualified tax-deferred retirement accounts begin. Failing to take the RMD means a 50 percent tax penalty on the amount that should have been taken out.
The MSN article emphasizes the importance of monitoring age milestones while planning for and during the retirement years. Naperville Public Library is offering a series of Financial Literacy workshops this summer to help community members understand financial matters such as those mentioned in this article. Check out the remaining workshops on August 13 & 14, 2014.
Finding Financial Advice That's Right For You will be offered at the 95th Street Library Meeting Room A on Wednesday, August 13, at 6:30 p.m. Strategies for Claiming Social Security Benefits will be offered at the Nichols Library Community Room on Thursday, August 14, at 6:30 p.m. Both workshops will be presented by Karen Chan of Karen Chan Financial Education & Consulting, LLC. No registration is required and the general public is welcome to attend.