Updated Monday, July 28, 2014 as of 2:18 AM ET
Blogs - The Informed Advisor
Social Security: Planning Tips by Age
Wednesday, February 19, 2014
Partner Insights

There are many age-related financial and planning milestones that clients will encounter in their sixties. Here is a list of some of the common ones that you and your clients should keep in mind.

59 ˝ - Penalty Goes Away
This is the age at which one can withdraw money from traditional IRAs, 401(k)s or similar retirement plans without restrictions and without an added 10% tax penalty. Withdrawals will still be taxed at normal tax rates. For most people, it is not wise to draw down retirement accounts at this relatively young age unless they have specific financial needs. Usually, the value of maintaining tax-preferred savings exceeds the benefit that may come from early spending.

60 - Survivors
This is the first year to collect a Social Security survivor benefit if a spouse or ex-spouse (if they were married for at least 10 years and never remarried) has died.

62 - Social Security – First Call
The earliest age that someone could collect Social Security retirement benefit. Most people should not file for benefits at this early age although certain spousal strategies may be an exception.

62 - Pension Alert
This is a common age at which pension benefits kick in. Pension features vary significantly from company to company or between industry and government. Encourage your clients to carefully evaluate the features of their pension today if they are fortunate enough to have one.

63 ˝ - Bridge to Medicare
Not an official milestone but might be an important age for laid-off workers who are offered COBRA health care benefits. COBRA benefits typically last for 18 months and 65 is the age at which one can begin Medicare medical coverage. Therefore, 63 and a half is the earliest age at which , if one were laid off and covered by COBRA health care benefits, that COBRA benefits would provide a health care bridge all the way until they are eligible for Medicare.

65 - Medicare
Medicare eligibility age. Most people should sign up for Medicare benefits within a 7 month window around this birthday in order to avoid lifetime surcharges on Medicare benefits. There are a few exceptions to this requirement such as active employees who are still covered under a large employer health plan.

66 - Social Security Magic Age
Sixty-six is the ‘magic age’ for Social Security when many options become available. For most boomers, 66 is the official full retirement age . At this age a number of creative Social Security strategies for couples become available such as File and Suspend and Restricted Filing. If a client is second-guessing their decision to file for earlier benefits, 66 is also the first age at which they can suspend benefits in order to allow delayed retirement credits to build up.

70 - Social Security – Last Call
Don’t delay any longer. This is the age at which there is no additional benefit to delay filing for Social Security benefits. If a client has not filed for benefits yet, congratulate them. They have maximized their lifetime monthly Social Security benefit but encourage them to file immediately.

70˝ - Required Distributions Ahead
Owners of retirement accounts such as IRAs, 401(k)s or other similar retirement plans are required to start taking specified required minimal distributions (RMDs) from these accounts when they turn seventy and a half. They actually have until the following April to make take the first year distribution. After that, each year’s distribution must be taken by Dec. 31 of that year.

The total required distribution is based on the total values of all of a person’s IRAs and retirement plans as of Dec. 31st of the earlier year. The total distribution may all be taken out of any one account or may be split among the accounts in any manner that one chooses

Paul Norr is a financial planner in Thousand Oaks, California and writes about planning and retirement. His website is www.paulnorr.com.

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(2) Comments
I think that you should research your last paragraph about taking the entire RMD for all retirement accounts/plans from one account, just a bit further.

See the follow FAQ from irs.gov : ----------------------- Can an account owner just take a RMD from one account instead of separately from each account? An IRA owner must calculate the RMD separately for each IRA that he or she owns, but can withdraw the total amount from one or more of the IRAs. Similarly, a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts. However, RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans have to be taken separately from each of those plan accounts. ---------------------- So, the RMD for some types of accounts can be lumped together and some can't.

Posted by KEITH G | Friday, February 21 2014 at 9:32AM ET
Keith. Thank you for the clarification. Paul
Posted by Paul N | Friday, February 21 2014 at 2:57PM ET
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