You’d be mistaken if you believed that significant birthdays only occurred between the ages of 18 and 21, then again at 30, 40, and 50. Other crucial milestone ages, along with restrictions, regulation changes and other distinctions, must be kept in mind when it comes to financial planning and retirement savings.
Whether you’re just starting out, in the midst of your career, or nearing retirement, we can help you reach your financial goals with Foran Financial Group. Your connection with money will shift depending on where you are in your financial path. Your top priorities will vary, and you’ll have to reevaluate your goals.
“What should I be doing right now?” is a typical query, regardless of the context.
Let’s take a look at some of the most significant ages in order to answer this issue.
When it comes to preparing for the future, it’s never too early. Get the discussion started by contacting Foran Financial Group.
Increase Your Retirement Contributions at the Age of 50
Retirement planning is essential at any age, but around the age of 50, you have the opportunity to raise the amount of money you put aside for this period in your life.
Your 401(k) contribution limit is $19,500 per year, and when you reach the age of 50, you may begin making catch-up payments of up to $6,500 every year.
Individual Retirement Account (IRA) contributions are limited to a maximum of $6,000 each year, with an additional $1,000 catch-up contribution.
When you reach the age of 50, you may want to consider lowering your investing risk. Your time to recover from big financial losses will shrink as you draw closer to your planned retirement date. Because of this, the way you see money changes. This is a good moment to discuss with your financial adviser the possibility of reducing the amount of money you invest in stocks and other risky assets.
Health care retirement planning may be discussed with a financial adviser at the age of 50. If you’re planning to retire, you’ll need around $285,000 to cover your healthcare expenditures. That amount is expected to climb as healthcare prices continue rising.
At the age of 55, the Rule of 55 begins to take effect.
The IRS Rule of 55 permits you to take withdrawals from a qualified 401(k) plan from your most recent employer without incurring the 10% early withdrawal penalty if you leave your job after the day you turn 55. However, you will still have to pay the standard income tax on each dividend.
IRAs are exempt from this regulation.
Don’t assume that just because you have the option to make withdrawals now, you should. Before making a choice that might have a long-term impact on your future, consult a financial expert.
IRA Withdrawal Penalties End at the Age of 59-12.
Although there are few exceptions, in general, you must wait until the age of 59-12 before taking any withdrawals from 401(k) or IRA accounts. The IRS imposes a 10% penalty if you are under the age of 18.
You may begin receiving Social Security benefits at the age of 62.
After reaching the age of 62, you may begin collecting Social Security payments. You will get around a third less money (over the course of your whole life) if you begin collecting now rather than wait until you reach full retirement age.
As a last point to keep in mind: Your Social Security payments will be cut by $1 for every $2 you earn beyond $18,240 a year if you continue working before your full retirement age.
Download our free eBook, How to Maximize Your Social Security Benefit, for additional information on how to take Social Security.
You are eligible for Medicare at the age of 65.
Medicare coverage is available to anyone who are 65 and older. If you don’t enrol in Medicare Part B by the deadline (three months before to your birthday and three months after your birthday), your monthly rates for Medicare Part B will permanently rise. When this rule does not apply, it is because you are covered by your company’s group health insurance or because your spouse is still employed and has group health insurance via his or her job. To avoid paying the Medicare B premium penalty for the rest of your life after leaving certain group health plans, you must enrol in Medicare within a certain period of time after leaving these plans.
When You’re 66 or 67, You’ve Reached Social Security’s Full Retirement Age
Social Security payments begin at full retirement age at this age for anyone born between 1943 and 1954. For those who were born between 1955 and 1959, the age at which they may begin collecting a pension is between 66 and 2 months and 66 and 10 months. The complete retirement age for persons born after 1960 is 67.
You must begin receiving Social Security benefits at the age of 70.
If you wait to begin receiving Social Security benefits after you are eligible, your payments will grow by 8% for each year you delay. When you reach the age of 70, there is no longer any incentive to delay claiming your Social Security benefits.
Now that you’ve reached the age of 70-12 or 72, you must take RMDs.
RMDs are the minimal withdrawals that a retirement account owner must take each year, which are known as RMDs. It was 70-12 years old before January 1, 2020, when RMDs may begin. The SECURE Act of 2019 changed this to a 72-year-old minimum legal age.
For the remainder of your life, you must begin withdrawing from your 401(k) or Traditional IRA on April 1 of the year following you reach the age of 72. Remember that you’ll also have to pay income taxes as a consequence of this.
If you don’t withdraw the minimum amount, you’ll be hit with a 50% penalty. You must withdraw your RMDs by Dec. 31 each year following your 72nd birthday if you have not already done so.
RMDs are not required if you’re still employed and have a 401(k) with the same firm, provided that you don’t control the company.
Consult your tax expert on the best methods to use these withdrawals so that you don’t end up paying more in taxes.
Throughout the Entire Process
According to the 2020 IRS laws, the data above should be taken into consideration. Changes in the IRS’s guidelines may affect the limitations, minimums, and, in certain situations, even the ages. It’s a good idea to seek the advice of a financial expert to make sure you’re obeying the regulations and making the most of your retirement contributions and assets.
As your life progresses and your relationship with money changes, it’s a good idea to revisit your financial plan on a frequent basis.
Contact us if you’re unsure about where to begin. Personalized, thorough financial planning and full-service wealth management are provided by Foran Financial Group in a friendly, personal atmosphere. Hundreds of families have benefited from our multigenerational planning and investing services. Find out how we can assist you as well.
LPL Financial, a registered investment adviser and SIPC-member firm, provides securities and financial advice services.
Only residents of the states in which Foran Financial Group’s financial experts are fully registered or licenced may they converse or do business with them. Any offers or acceptances from residents of other states are prohibited.