Insights

Age Milestones: Unlocking Financial Opportunities on the Road to Retirement

As you navigate the journey towards retirement, each passing year unveils an array of significant financial opportunities, extending far beyond the mere accumulation of birthday candles. The transition through various age milestones brings new advantages and considerations, shaping the trajectory of retirement planning.

50 years old

  • Turning 50 means you may be able to take advantage of making “catch-up” contributions in your retirement accounts. Most individuals aged 50 and above can contribute an additional $1,000 to Traditional or Roth IRA accounts in 2024 bringing the total potential contribution to $8,000.
  • The additional catch-up contributions also apply to 401(k)s and 403(b)s.  For those accounts, turning 50 means you can kick in another $7,500 bringing the salary deferral limit to $30,500 in 2024.
  • If you’re enrolled in a SIMPLE IRA, you can contribute an additional $3,500 when you turn 50, bringing your total potential contribution to $19,500 in 2024
  • Talk to your plan administrator or employer for help determining how these additional deferral amounts can be accommodated.

55 years old

  • Health Savings Account HSA participants can make “catch-up” contributions to their HSA starting in the year they turn 55.
  • For single individuals, annual contribution increases by $1,000 to a limit of $5,150. For families, the limit with the $1,000 catch up contributions is $9,300 in 2024.
  • There’s a special exception for penalty-free distributions from qualified plans at age 55 (e.g., 401(k), 403(b), profit sharing plans). Those who separate from service in the year they attain age 55 or any year after can withdraw funds from the plan without a 10% additional tax penalty.
  • Take advantage of the senior discounts that start appearing at grocery stores, theaters, and bookstores.  Woohoo!

59 ½ years old

  • Age 59½ is the milestone when most retirement accounts can be accessed for any reason without a 10% additional tax penalty. These accounts include IRAs, 401(k)s, 403(b)s, profit sharing plans, other qualified plans, and non-qualified annuities.
  • Most qualified plans, such as 401(k)s, 403(b)s, and profit-sharing plans, allow for an in-service non hardship withdrawal at age 59½.
  • If you’re still working and looking to diversify by rolling funds from your 401k to an IRA, you may now be able to do so.

60 years old

  • If you’ve lost a spouse, you may become eligible to collect a Social Security survivor’s benefit when you turn 60 (assuming your spouse was eligible, and you didn’t remarry prior to age 60).
  • Survivor’s benefits collected prior to Full Retirement Age will be reduced; however, there’s no impact on individual benefits. Therefore, you may be able to continue growing your own benefit and then switch to it later if it’s higher.
  • Keep in mind, any benefits collected prior to Full Retirement Age are subject to the earnings test and earned income may reduce your benefits.
  • Check with your ZRC Wealth Advisor to evaluate your survivor’s benefits, individual benefits, and work status when deciding the best claiming strategy.

Social Security, Medicare, and Required Minimum Distributions

62 years old

  • You become eligible to collect Social Security retirement (individual and/or spousal) benefits following your 62nd birthday albeit at a reduced rate. If you’re eligible, a reduced spousal benefit may also be available.
  • The National Park Service offers a senior lifetime pass called the “America the Beautiful – Senior Pass” for U.S. citizens who are 62 years old or older for only $80. This pass provides access to more than 2,000 federal recreation sites, including national parks, wildlife refuges, and national forests. What a deal!

65 years old

  • You become eligible to apply for Medicare three months before the month you turn 65.
  • If you’re not collecting Social Security, you should enroll in Part A three months prior to your 65th birthday to avoid a gap in health insurance coverage. Part A coverage is free for most people.
  • If you continue to work, you should check with your employer’s plan to see how it integrates with Medicare and whether you’re eligible to opt out of Part B.

66 – 67 years old

  • Full Retirement Age (FRA) for Social Security is based on your birth year (see chart). If you’ve not received a retirement or disability benefit yet, in the month after you reach your FRA, you’re eligible to collect your full retirement benefit. If you’re eligible you could alternately start collecting a full spousal benefit instead if it’s more.
  • The Social Security Administration generally recommends applying for benefits three months before the month you would like them to start.

73 – 75 years old

  • Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 72 (73 if you reach age 72 after Dec. 31, 2022).
  • Account owners in a workplace retirement plan (for example, 401(k) or profit-sharing plan) can delay taking their RMDs until the year they retire, unless you’re a 5% owner of the business sponsoring the plan.
  • If you fail to withdraw the full amount of the RMD by the due date, the amount not withdrawn could be subject to a significant excise tax.
  • Roth IRAs do not require withdrawals until after the death of the owner.
  • The RMD age moves out to 75 for retirees who attain age 74 after December 31, 2032.

In essence, the journey towards retirement is marked by a tapestry of financial milestones and opportunities, each age unveiling new dimensions in planning and preparation. By embracing these opportunities and navigating the intricacies of retirement planning, you can chart a path towards financial security and fulfillment in your golden years.

Reach out to your ZRC Wealth Advisor for help with any of these topics and enjoy the journey!

For educational and informational purposes only and should not be construed as specific investment, accounting, legal or tax advice.