Dear Valued Financial Partners and Friends,
Today is the most important date in your personal retirement planning. Today is the only day you can truly make a change. Yesterday has passed. Tomorrow is elusive. Act today! Here are some ages to help you, your spouse, and your posterity maximize your financial and retirement benefits.
Age 70½: For your 401(k) and traditional IRA accounts, withdrawals are mandatory. If your birthday is on or before June 30th, you must begin taking distributions the year you turn age 70. If your birthday is after June 30th, you must begin taking distributions the following year. (Do not take distributions from your Roth IRA accounts. The balances in these accounts can continue to grow tax-free without required distribution until passed to your beneficiaries.)
Age 70: If you delay taking Social Security benefits until age 70, you will take home 76 percent more money each month than at age 62, and 32 percent more money each month than at age 66. Wow! This is critical to get right because your surviving spouse will be entitled to 100 percent of your benefit.
Age 66-67: You will be penalized if you claim your Social Security benefit before your Full Retirement Age (FRA), which varies depending on when you were born. For those born between 1943 and 1954, it is 66. For those born between 1955 and 1959, your FRA begins at 66 and 2 months and moves in two month increments for each year. For those born after 1959, your FRA is age 67.
Age 66: By the way, I just introduced the term: Full Retirement Age. Your Full Retirement Age is when your Social Security benefit won’t be reduced. Your Full Retirement Age is important because if you claim your Social Security benefit earlier than your Full Retirement Age, you will be increasingly penalized the earlier you claim the benefit.
Age 65: You become eligible for Medicare at age 65 and it is mandatory for you to enroll in Part A. There is a permanent penalty for each month you delay. You may enroll up to three months after your 65th birthday, but to be safe enroll in Medicare during the three months before your 65th birthday!
Age 62: If you qualify, you may sign up for Social Security benefits at age 62 for your own or your spousal (current or former) benefit. You have many options and it can get complicated. As an example, a working spouse can go to the Social Security Administration to “File and Suspend” his or her benefit. This continues to postpone the benefit, while permitting an immediate claim to the spousal benefit. (In some situations this is a brilliant strategy.)
Age 59 ½: Don’t you dare touch those retirement funds just because you can! You may need them later. A husband and wife, both age 65, have a 50 percent chance that one will make it to age 92.
Age 55: During the calendar year you turn age 55 or later and you retire from your job, you may take 401(k) distributions without penalty. IRAs, however, do not enjoy this same tax code protection. Qualified public retirees may begin penalty-free withdrawals in the year they turn age 50 or later.
The date you die: Your assets receive a step-up in tax basis. I recommend completing IRS Form 706—even though it may not be necessary. Filing this will help establish and prove the step-up in basis numbers.
Today: It’s the best day to change your future. Let us help you. Remember, your financial success is our passion!
Bullish Best Wishes,
Roger M. Smedley, CFP®