Personal & Financial Strategies

Financial Milestones For Your 50s, 60s and 70s

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Don’t let opportunities pass by as you reach major age milestones. Jerry Korabik, financial advisor with Savant Capital Management in Geneva, shares some important dates when you can benefit from retirement planning.

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You have worked hard, saved and accumulated wealth, and are now entering the years when you can benefit from the money you’ve saved as well as government-provided benefits. There are many milestones during this time period.

Age 59.5: This is the magic age at which you gain access to all your retirement accounts, including IRAs, without paying the 10 percent penalty. You will pay ordinary income tax on the money if the contributions were pre-tax. Just because the withdrawals are exempt from the 10 percent penalty does not mean you should withdraw all of the funds right away. Leaving money in your qualified accounts maintains its tax-deferred status and allows you to withdraw these funds later, potentially at a lower tax bracket.

Age 62: This is the minimum age at which you qualify for Social Security benefits. For every month you take Social Security before your full retirement age (FRA), there will be a permanent reduction in your benefits. As an example, if your FRA is 67 and you start taking your benefits at 62, your monthly benefit will be reduced 30 percent.

Age 65: This is the age at which you qualify for Medicare benefits. You will have a seven-month period to sign up for Medicare without incurring a penalty, beginning three months prior to the month you turn 65 and ending three months following the month you turn 65. Medicare Part A is free to all individuals 65 and older, but Part B has a monthly premium. You may waive Medicare Part B when you sign up for Part A, but this will result in a higher premium if you decide to enroll later. Part A covers hospital care, hospice and other limited services. Part B covers medically necessary physician services and preventive care.

Ages 65-67 (FRA): The Social Security Administration determines your FRA based on the year you were born. This is the age at which you will receive 100 percent of your benefits, which is called your Primary Insurance Amount (PIA). The PIA is calculated from your earnings over your working life.

Age 70: If you file for Social Security benefits at age 70, you will receive the maximum benefit allowed, relative to your earnings history. There is an 8 percent increase per year in your benefits for each year you delay Social Security between your FRA and 70.

Age 70.5: This is the age at which Required Minimum Distributions begin. If you have a Traditional IRA, you are required to start taking distributions by April 1 of the year following the year you turn 70.5. The amount to take is based on a factor determined by the IRS (correlated to your life expectancy) and is recalculated each year. You are also required to start taking distributions if you still have money sitting in a 401(k), profit sharing, 403(b) or other defined contribution plan, provided you are no longer working.

These are some of the milestones you can expect in your pre-retirement and retirement years. This can be an overwhelming time of decisions that may impact you for years. The best approach is to gather as much information as you can before making these decisions and decide what works best for you and your family based on your financial needs and estimated longevity.

This is not intended as personalized investment or tax advice or to be an exhaustive list of all financial milestones in your late 50s through early 70s. It is meant only to highlight the significant milestones for the general population.

Jerry Korabik, CFP®, AIFA®, CRPS®, is a financial advisor with Savant Capital Management. Savant has an office in Geneva at 1797 W. State St., Ste. C.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S.

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