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FEBRUARY 2024 | February 3rd, 2024

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Financial Milestones at Key Ages

Discover the power of financial milestones at pivotal ages! From maximizing retirement contributions to navigating Social Security and reverse mortgages, our guide unveils the key steps for a secure future.

As you journey through life, certain age milestones bring with them unique opportunities and considerations for your financial well-being. Let’s explore these milestones and the financial aspects you should be aware of, tailored to your age.

Age 50: Embrace the Power of Catch-Up Contributions

Congratulations on reaching the milestone of 50! This age brings exciting financial opportunities:

Catch-Up Contributions to Retirement Accounts:

  • At 50, you become eligible to make catch-up contributions to retirement accounts like IRAs, 401(k)s, 403(b)s, and 457s. This means you can contribute more than the standard annual limit, helping to boost your retirement savings.
  • For a 401(k), 403(b), and 457 plan, you can make a catch-up contribution of $7,500 for a total maximum contribution of $30,500 in 2024.
  • IRA’s allow you to make a catch-up contribution of $1,000 for a total maximum of $8,000 in 2024.

Age 55: Harness the Benefits of Your HSA and Penalty Exceptions

As you turn 55, additional financial advantages come into play:

Catch-Up Contributions to HSA:

  • At 55, you can make catch-up contributions to your Health Savings Account (HSA). This is a valuable opportunity to bolster your health-related savings for the future.
  • In 2024, you can contribute up to $4,150 into your HSA if you are single, and $8,300 as a family.
  • In 2024, the catch-up contribution allowed is $1,000.

Penalty Exceptions for Certain Retirement Account Withdrawals:

  • You become eligible for penalty exceptions on certain withdrawals from retirement accounts, offering more flexibility in managing your finances.
  • These penalty exceptions are referred to as “The Rule of 55”
    • Generally, if you take a withdrawal from your 401(k) or 403(b) before age 59 1/2, you will have to pay a 10% early withdrawal penalty.
    • However, the IRS has established the “Rule of 55”, which allows those who leave a job (either to retire early or for any other reason) in the year they turn 55 or later to remove funds from the above accounts without having to pay the 10% early withdrawal penalty.
    • It is important to note that this rule does not extend to IRA’s, cannot be used for any other retirement accounts you still have with former employers, and you will still have to pay ordinary income tax on the withdrawals made.

Age 60: Explore Social Security Survivor Benefits

As you enter your 60s, consider the following financial aspects:

Social Security Survivor Benefits:

  • At 60, you become eligible to claim Social Security survivor benefits as a widow/widower, even though it’s at a reduced rate. Understanding these benefits is crucial for comprehensive financial planning.

Age 62: Social Security Retirement Benefits and Reverse Mortgage Eligibility

Social Security Retirement Benefits:

  • At 62, you can start claiming Social Security retirement benefits, albeit at a reduced rate. It’s essential to weigh the pros and cons of early claiming based on your unique circumstances.
  • Working with your financial planner as you approach this age is vital to finding the claiming strategy that will work best for you within your overall plan.

Reverse Mortgage Qualification:

  • You become eligible to qualify for a reverse mortgage, offering a potential source of income.
  • Exploring this option requires careful consideration and professional advice. Sometimes it isn’t enough to trust the words of Tom Selleck!

Age 65: Embrace Medicare Coverage and HSA Flexibility

Medicare Coverage:

  • At 65, you become eligible for Medicare coverage. Ensuring a timely application is crucial to secure healthcare benefits in your retirement years.

Non-Medical Withdrawals from HSA:

  • Enjoy the flexibility of making non-medical withdrawals from your HSA without penalties, providing additional financial options.
  • It is important to note while there will not be an applied penalty on your withdrawal for a non-medical expense, you will still have to pay taxes on it.

Age 66-70: Full Retirement Age and Maximizing Social Security Benefits

Full Retirement Age:

  • Depending on your birth year, your full retirement age ranges from 66 to 67. Understanding this milestone helps you make informed decisions about when to claim Social Security benefits.
  • As stated above, claiming earlier than your FRA will cause your monthly benefit to be reduced accordingly.

Maximum Social Security Benefit at 70:

  • Waiting until age 70 to claim Social Security ensures you receive the maximum benefit. Patience can significantly impact your long-term financial security.
  • Your FRA benefit will increase by 8% per year until you reach 70.
  • Keep in mind there is no further increase to your Social Security benefit if you continue to wait after turning 70.

Age 70½: Qualified Charitable Distribution

  • At 70½, you become eligible to make a Qualified Charitable Distribution (QCD), offering a tax-efficient way to support charitable causes.
  • Starting this year, QCDs will be indexed to inflation.
    • This means you can elect up to $105,000 in 2024, up from $100,000 in 2023.

For more information on QCDs, click here.

Age 73-75: Required Minimum Distributions and Charitable Giving

Required Minimum Distribution (RMD):

  • RMD starts at 73 if born before 1960 and 75 if born in 1960 or later. Adhering to these distributions is a crucial aspect of retirement planning.
  • Being aware of your RMD age can prevent you from owing penalties.

In conclusion, each age milestone brings a host of financial considerations. As you navigate these stages, it’s crucial to consult with financial professionals to make informed decisions that align with your goals and aspirations. Your financial journey is unique, and understanding these milestones empowers you to confidently live a great life!

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $1.8 billion.

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