Are you planning for age-related tax and retirement milestones? You should be. There are certain age-related milestones that are extremely important. In this article, we discuss several key age-related milestones that we think you should know about. 

Tax and Retirement Savings by Age 

Age 50

Ideally, you should have 6x your annual salary saved for retirement by age 50. You should also be knowledgeable about the specifics of Social Security, Medicare, and employer retirement benefits. 

Starting at age 50, you will be able to take advantage of catch-up contributions to retirement plans. These allow you to contribute beyond the regular contribution limit in cases where you may not have made the full contribution you were eligible for.

As of 2021, you can make a maximum annual contribution of $19,500 to your employer’s retirement plan if you are still working. After age 50, you can contribute an additional $6,500.

If you got a late start or haven’t been able to contribute the maximum to your plan, it is crucial that you maximize your catch-up contributions. This is a great opportunity to contribute more to your retirement savings.

[Related: Tax Planning]

Age 59 ½ 

When you reach this age, you become eligible to make withdrawals from a traditional IRA or tax-deferred employer retirement savings plan without paying the 10% penalty. 

Age 60

Ideally, by the time you turn 60, you should have 8x your annual salary saved for retirement. By this point, you should also have your mortgage, home equity loans, and credit card debt paid off. This is also the time to catch up on any missed retirement strategies like downsizing, moving, selling assets, or more. 

During this time, you can also start learning new skills or preparing for your transition into retirement. Will you take on a volunteer role or part-time job? Maybe you want to pick up a new hobby. 

Medicare Eligibility

At age 65 you are eligible for Medicare. If you or your spouse worked and paid Medicare taxes for at least 10 years, you are eligible for premium-free Medicare Part A. This covers inpatient care in hospitals, critical access hospitals and skilled nursing facilities. It also helps cover the cost of hospice care and certain home health care. Understanding the full scope of your Medicare coverage is an extremely important element of your overall planning. 

If you did not pay Medicare taxes and you are 65 or older and a citizen or permanent resident of the United States, you may be able to buy Part A. 

Everyone must pay for Part B if they want it.  Part B covers doctors’ services, outpatient care and other medical services not covered by Part A. While it is optional, Part B helps pay for medical services and covers preventative services like lab tests, exams, and screenings. You can apply for Medicare HERE. 

Social Security Benefits

You become eligible for full Social Security benefits between age 66-67 depending on when you were born. The age that you begin receiving benefits will affect how much your monthly benefits are. You can begin receiving benefits at 62 but the amount will be permanently reduced. Likewise, if you defer past your full retirement age up until age 70, the amount you receive will be permanently increased.

[Related: Check Your Social Security Statement Online] 

Qualified Charitable Distributions

Beginning at age 70 ½ you can make qualified charitable distributions from your IRA account. This is a direct transfer of funds from your IRA to a qualified charity. These distributions can be counted towards your required minimum distributions if certain requirements are met. 

Additionally, QCDs (Qualified Charitable Distribution) are excluded from taxable income and they don’t require you to itemize. Your financial advisor can help you make the most of these tax advantages. 

Required Minimum Distributions

Generally, RMDs are the minimum amounts that a retirement plan owner must withdraw annually according to current tax law. It starts the year that the plan owner turns 72.  If you own multiple IRAs or 403(b)s, you must calculate the RMD amount separately for each account. However, you can take the total amount from one or more accounts. Failure to take the full RMD will result in a 50% tax on the amount not withdrawn.

Financial Planning Roadmap Help

There are several age-related tax and retirement milestones that you should be considering when it comes to financial planning. Having a knowledgeable and trusted financial advisor is a great way to plan for all the right milestones. To learn more, please contact Argent Bridge Advisors today.