The Financial Planning Moments In Everyone’s Life

The Financial Planning Moments In Everyone’s Life

Have you ever wondered why we offer our services on an ongoing basis? It’s simple: Things change! 

It’s sometimes easy to put tasks off — to not do things. That’s why we’re here to be your accountability partners. And we’re not just talking about that insurance or estate planning review that you’ve been putting off. (Although we understand, and that’s what our annual service calendar is for!)

Beyond keeping up with all of your shoulds on an annual basis, some key moments in our lives necessitate a financial planning check-in — and they’re universal. That means they can creep up on you! So whether you’re nearing one of these milestones or just planning in advance to make the most of it, check them out below. And grab a spot on the calendar if you’re experiencing or nearing a key moment in your own life!

Catching Up at Ages 50 & 55

Did you get a late start on your retirement savings? See a recent drop in your account balances? Or just need an extra boost? Age 50 brings the ability to increase contributions to retirement savings in your IRA as well as your 401(k) or similar account. Next up, age 55 gives you extra contribution room in your HSA. Check out this year’s catch-up amounts in Your 2023 Contribution Limits.

Early Withdrawals for Those 55 and Up

Planning to retire in your mid-to-late 50s? If you’re on track toward an early retirement or financial independence a few years before a “traditional” age, like 65, you might want to pay special attention to this one. That’s because, if you retire from, leave, or lose your job after age 55, you can draw funds from the 401(k) you had via your previous employer and skip the 10% penalty. However, this only applies to your 401(k) through your most recent employer.

Withdrawing at Age 59.5

Planning to work a little longer than age 55? When you hit age 59.5, you’re able to withdraw funds from your IRA or 401(k) penalty-free. That means you can avoid the 10% penalty that you’d otherwise incur. And you can even take advantage of these withdrawals while you’re still working for your employer. Just keep in mind that your withdrawals will be taxed as regular income, so you could end up in a higher tax bracket by the time you combine that regular income and the withdrawals you haven’t been taxed on yet.

Social Security at 60 and 62

If you were married and lost your spouse, you may be able to claim your Social Security benefits. Surviving widows and widowers can make these claims as early as age 60. 

Age 62, on the other hand, is the earliest that someone who has paid into Social Security can claim their own benefit. While this may not be advisable for some since Social Security benefits increase a little for each month after 62 that you delay claiming them, those who need this income have the opportunity to make their claims. For those who can wait even longer, Social Security benefits increase by a whopping 8% for each year after they reach full retirement age (FRA) — and where else do you receive an 8% return on investment?

Medicare at Age 65

This one probably doens’t come as a surprise since it’s such a common retirement age. But did you know that you don’t have to begin Medicare at age 65? If you or your spouse is working and you’re on your or their employer’s health care plan, you might have the opportunity to stay on it. This can be especially nice if the employer pays all or most of the premium. And while you can’t begin Medicare until age 65, you can bridge the gap between an early retirement and Medicare age with a plan through a healthcare marketplace or individual coverage.

Full Retirement Age Between 66 and 67

We get it, you can fully retire at any age, given you have the resources and plan in place to do so. But ages 66 and 67 are the Social Security Administration (SSA’s) set ages for those who haven’t already reached age 70 (more on this below). Based on your birth year, the “full” retirement age that the SSA identifies for you might be 66, 66 and some months, or 67. It’s simply the age at which you get your “full” Social Security benefit — meaning it’s not reduced for claiming earlier than your FRA. But wait … there’s more!

Maximum Social Security Benefit at 70

Remember what we said earlier about that 8% increase in Social Security benefits for each year you wait to claim after your FRA? Well, all good things must come to an end, and that increase stops at age 70. When you hit this milestone, any Social Security benefits you’ve earned will no longer increase, and it’s time to begin receiving monthly payments. Don’t need ‘em? You can’t just say no, but you can, of course, save any dollars that you don’t need to support your lifestyle.

QCDs at 70.5 and RMDs at 72 (or 73 or 75)

These last two milestones come as a “can” and a “must.” You can make qualified charitable distributions from your IRA starting at age 70.5. This means that a donation to an IRS-qualified charity can come out of your IRA tax-free so the charity receives the full amount. What you can’t do is take those funds out, make yourself the intermediary, and still give the whole amount to charity. That’s because the tax man becomes another intermediary in that case. 

At 72 (or 73 or 75, thanks to the SECURE 2.0 Act), you’re required to take distributions from qualified accounts, like your IRA and 401(k). The treasury wants that money back in circulation and not locked up in your retirement accounts, after all!

Is one or more of these milestones resonating with you? Let us know, and we’ll mark it as a key date in your financial plan. We can even add it to your RightCapital so you get reminders leading up to the big day. Those reminders are great nudges for you to schedule a consultation so we can review what it means for you and plan your next steps.

In a future blog, we’ll focus in on five key financial planning moments in the lives of children. If you have kids of your own or a special little one is part of your life (or soon to be!), you won’t want to miss it!