Ep. 211 – Important Age Milestones in Retirement

In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the important financial planning milestones that happen at different ages. These are things you should be thinking about and preparing for before getting to retirement.

Listen in to learn about the different financial milestones that happen in the life of a child from birth all the way to age twenty-six. You will also learn when to work on your catchup contributions, the social security eligibility age, when to withdraw all your retirement assets and much more.

In this episode, find out:

●     The future-based savings accounts you can set up for a child from birth.

●     The key ages where different financial milestones happen all the way to age twenty-six.

●     Age fifty milestone – the catchup contributions you can add after age fifty in 2023.

●     Age fifty-nine and a half milestone – the age where you can withdraw all your retirement assets without a penalty.

●     Things that happen at age sixty-two where you’re eligible for social security at a reduced rate.

●     The different things that happen at age sixty-five including eligibility for Medicare.

●     Understanding why the full retirement age is key for social security benefits.

●     Why there’s no reason not to turn on social security after the age of seventy.

●     Age seventy and a half – when you get full deductibility on your QCDs. 

Tweetable Quotes:

●     “When you’re at age fifty-nine and a half or above, just know that some options when it comes to investing and retirement planning become available to you.”– Murs Tariq

●     “Age seventy and a half is key because that’s when you can start taking contributions in your IRA and giving them to a charity.”– Radon Stancil


If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:Welcome everyone to Secure Your Retirement podcast. Sometimes we get to do these podcasts and we learn things ourselves. And I think this is going to be kind of one of those episodes where it’s just got nice reminders. This episode we’re going to kind of dedicate to what are in all essence age milestones, and it’s not about the older we get, the more things that are there. It’s just some of the rules around some of the financial planning, some tax issues, all those kinds of things that are affected at different ages throughout our lifespan. So we’re going to kind of go through those. Some we’re going to go quick, some we’re going to take a little bit of time to talk about. But just want to say as we’re going through this, and I told you we’re going to go through some of them kind of quick, the purpose here is to make sure you could go find it really easy.  
 So if you’re listening to this and you’re thinking, man, that’s a lot of different milestones that we got to go through and kind of think that through. I want to remind you right up front that we do have a blog written on this particular topic. And so you can go there and kind of see all those ages listed out so you don’t have to stress about it as you’re listening to this. So Murs is going to take some ages to get us, he’s going to go through some ones that may or may not apply, and then we’re going to take a little bit of time to explain some others. So Murs, can you kind of get us from day one?  
Murs Tariq:Yeah, so I’ll start with the beginning of age milestones. And again, some of these may or may not apply, it just depends on if you have younger kids or if you have grandkids that you want to be thinking about. But from birth, as soon as there’s a social security number, you have the ability to set up a 529 account. 529 is basically a college savings account, so a much future-based type of account, or you could set up what’s called UTMA or UGMA accounts. Basically they’re custodial accounts for minors, so those can happen at birth. Then we fast forward to age 13. This is where a child is no longer eligible for a child and dependent care credit. So coming on your tax return at age 13, that phases out. At age 17, child no longer eligible for a child tax credit. So a little bit different than 13.  
 That was a child and dependent care credit. Now 17, child is no longer eligible for a child tax credit. And then age 18, we know age 18 as when someone becomes “an adult,” they can do certain things at age 18 from a financial part of things that becomes the age of majority in most states. North Carolina is one of those. At age 18, also, if you had set up one of those UGMA/UTMA type of accounts that are custodial where you act as the custodian for the child at age 18, the age of majority, you can no longer be the custodian for that type of account. So this power shifts from in your hands to the actual, the child who is now considered an adult. So if you have those types of accounts, when that person turns 18, there’s a process to shift those assets fully into their name and you kind of evoke your power over those assets.  
 Also, in some states that age 21 is when that majority is recognized, not at the age of 18. And the same process there, once they turn 21, if age of majority is 21 in that state, then you’re being removed as a custodian on these UGMA and UTMA type of accounts. And then at age 24, a child who is a full-time student is no longer subject to the kitty tax and age 26, an adult child may lose parents’ health insurance coverage under the Affordable Care Act. We hear about that one a lot that you got the kids through college, but they worked for a company or did an internship or whatever it is, and they didn’t have health insurance, so they’re able to stay on the parents’ plan, but at age 26, they’re no longer able to or eligible to stay on the parents’ plan. So that is a quick overview from birth to age 26. Again, may or may not apply, but there’s some key dates there and ages that are important.  
 So now we’ll get into more of the retirement planning specific types of milestones. Some of these are you’re going to be very familiar with and you’ve heard of and some of these may be new to you. So Radon, why don’t you kick us off?  
Radon Stancil:All right, our next milestone is age 50, and the key about this age is that you can do catch up contributions in your 401k, 403b, 457 plan. So under 50 in 2023, you can contribute $22,500 into that account. Well, if you’re 50 years of age and older, you can put an additional $7,500 into the account. And what’s real key here is we’ve had clients who’ve come in and they forgot to up that, they were at their employer and they forgot to make those adjustments. So as long as you get that in before the end of the year and you turn 50 this year, go ahead and do that if you want to get those extra contributions in there. Also, I mean if you’re doing IRAs, you got to catch up there as well. Now as far as the other one here that’s age 50, just a note is you’re also eligible for social security benefits for disabled widows and widowers.  
 Then we got age 55, age 55, catch up contributions on an HSA. And just to kind of go through those numbers, HSA, if I’m a single person, I can put $3,850. If I’m doing family, it’s 7,750, but if I’m 55, I can put another thousand dollars into my HSA. So again, those are just key things to keep in mind when it comes to that. All right, Murs, I’m going to let you hit a big one that we talk about a lot.  
Murs Tariq:Yeah, age 59 and a half, this one is very important because it is now you have reached the age to where you can actually withdraw on your retirement assets without a penalty. So if you have an IRA, a 401k, 403b, all these different retirement accounts that you’ve been building up over the years, and if you were to take a withdrawal before at age 59 and a half, in most cases, you would have a 10% early withdrawal penalty. Once you’ve reached age 59 and a half and afterwards, now you have access to those accounts. It doesn’t change the fact that there are still taxes involved in a lot of these accounts, but you now have no penalties at age 59 and a half and older. Also, what’s really key about this age is that if you’re working for an employer and you have a 401k, a lot of times that asset is locked up in the 401k and so you can only do whatever is available within that plan.  
 At age 59 and a half, you now have the option in most cases to roll the assets out of the 401k and do a rollover to an IRA. And you may ask the question, well, why would I ever do a rollover to an IRA? That’s really a podcast in itself, but on a high level it opens up the really the investment universe to you. So while you’re in a 401k, you may know that you have a limitation on the different funds that are available within the plan. Very rarely can you do any stock purchasing or any ETFs or anything like that. When you move assets out from the 401k to an IRA, it opens up the investing universe to pretty much anything that you want to invest in because you’re not limited to an employer-based plan. It also opens up the ability for you to now hire professional management management services, whereas in a 401k, it’s very difficult to get that type of advice. Anything I’m missing there at 59 and a half Radon?  
Radon Stancil:No, I think you got it all.  
Murs Tariq:Yeah, that’s a big one. So if you’re at that age or above, just know that’s some options when it comes to investing and retirement planning really become available to you.  
Radon Stancil:All right, let’s jump to age 62. 62 is where a person is eligible to get social security at a reduced rate. So a lot of times when we’re talking to clients who maybe have retired early or for whatever reason are deciding whether or not they can take social security, you can begin social security at age 62, but there’s going to be a reduction there. And so a big discussion we have with clients is should I ticket at 62 or wait till later? And a lot of that comes down to how much money a person’s making in those ages.  
 Just to kind of review that real quick, for 2023, if you are 62 and you’re going to take social security early, the limit is $21,240. So you can’t make a lot of money and take social security because if you do, then for every $1 that you are making above that, well, for every dollar you make above that… I’m sorry I’m saying it wrong. For every $2 you make above that, $1 will be reduced of your social security. So let me say that again, if you make $2, $1 of your social security is going to be reduced. And so that’s just not a key way to plan that. If you’re going to make more than that, don’t take your social security early.  
Murs Tariq:All right, so the next one is going to be age 65. There’s a lot of things that go on with age 65, but the most is the eligibility for Medicare. And a key thing here to understand is that you can actually apply early for Medicare at three months earlier. So at 64 and nine months is really when you want to start thinking about it if you haven’t already done the research as to what types of plans, what types of coverage are you going to be looking for with Medicare, you really want to start that process at 64 and nine months, and then at 65 is when you actually become eligible and you have those coverages available to you.  
 Also, I think really important, it’s another retirement planning type of strategy is if you have an HSA and you’ve been funding that, one strategy is that you do your best really not to touch that HSA and it turns into another retirement account at age 65. Well, let me say it this way, prior to age 65, HSAs are really reserved for medical expenses and medical expenses only, and you get tax-free withdrawals on those if they’re used properly. But at age 65, you become eligible in your HSA for non-medical withdrawals as well without any type of penalty. So I think that’s a nice little planning tool if you fund an HSA and you have turned it into a strategy to really not touch it at all. And we can talk about that too.  
Radon Stancil:All right, so now we’re going to get to what’s called full retirement age for social security benefits. Now, the reason why this is such a key age I think, is that if I am earning money and I want to wait till full retirement age, I don’t have a limit on my income that I make once I reach or achieve what’s called FRA or For Retirement Age. It means if I’m still working and I have a good income, I can still get my social security if I choose and I get 100% of the benefit. Ultimately, the way this worked is if you were born between 1943 and 54, it was 64, I’m sorry, 66. 66 was your age.  
 And then what they started doing is basically notching it up a little bit where it would go 66 and two months, 66 and four months, and it’s just year by year. So if you take, for example, if you were born in 1958, it’s 66 and eight months, 59, 66 and 10 months. If you were born in 1960 or later, it’s 67. That’s the last time that they’re doing a ramp up. Now I would tell you, I think that’s going to get adjusted, but for right now, if you were born in 1960 or later, 67 is your full retirement age. Then we got our next one.  
Murs Tariq:All right, so now we’re at 70, and when we’re talking about social security, you become eligible to start drawing on benefits for most people at 62. 62 is usually the lowest amount that you’re going to get, and everyone knows that if you defer it, the income is going to grow. 70 is where we hit our maximum social security benefit. So after the age of 70, it no longer is going to grow. And so in most cases, I would say 99% of the time, if you’re at 70, there’s no reason to not go ahead and turn on your social security just because it’s not growing anymore. So that’s 70.  
Radon Stancil:All right, our next one’s just a little bit later, 70 and a half. And I used to always wonder why did the IRS or the government want to say a half, 59 and a half, 70 and a half? Well, 70 and a half is key because that is when I can start taking distributions from my IRA and giving them as a contribution to a charity called a QCD. And the reason why that’s so key is that when I take the money out of the 401k, I’m sorry, or IRA, either one of those, I don’t have to ever claim it as taxable and it goes straight to the charity and it just is a very clean transaction. I’m getting a full deductibility in all essence of those contributions. So 70 and a half is when that begins.  
Murs Tariq:And I want to make a key distinction there too, because it used to be at 70 and a half, that was when everyone would think of, oh, that’s when my required minimum distributions start on my IRA, my pre-tax type of assets. And so now at 70 and a half it’s just that QCD that Radon talked about. It used to be 70 and a half was QCD and RMDs required minimums, but a few years ago, they raised that age on the required minimums, the RMDs to age… Actually it was in January of this year that they moved it to 73. And the caveat there is if you were born before 1960, so if you were born before 1960, you have to take your required minimum distribution on your pre-tax assets at the age of 73.  
 One other addition that they did into the age is that if you were born after 1960, then the requirement begins at age 75, not age 73. So that’s a recent change that happened here in January because of the Secure Act 2.0. So age 73, if you were born before 1960 and age 75 if it’s 1960 or later. And that’s really, when it comes to retirement planning, those are some of the major milestones that we’re talking to clients day in and day out on things you want to be thinking about, things you want to be prepared for, and it’s a nice, nice concise list there.  
Radon Stancil:All right, and just don’t forget, you can go to the website POMwealth.net, go to the blog page and you will see an article on these 2023 important milestones, and they’ll be all listed there for you nicely. Hope this has been beneficial. Please let us know if you think of anything that you’d like for us to discuss on the podcast. We certainly want it to be helpful and insightful to you. Otherwise, we will talk to you again next Monday.