Decoding Retirement Milestones: Age-Based Strategies for Financial Success

This episode highlights seven crucial age milestones for effective retirement planning and the strategic decisions that accompany each. Listeners learn how these milestones—from catch-up contributions to Social Security eligibility—can shape a well-structured financial future.

• Age 50: Eligibility for catch-up contributions to retirement accounts 
• Age 59 1⁄2: Tax-free rollovers from 401(k)s to IRAs 
• Age 62: Considerations for collecting Social Security 
• Age 65: Eligibility for Medicare and healthcare planning 
• Ages 66-67: Achieving full retirement age for Social Security 
• Age 70: Timing for maximum Social Security benefits 
• Age 73: Required minimum distributions and associated rules

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
Sign up for one of our upcoming events at https://www.masterplanyourretirement.com/events

Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Speaker 1 0:06

What are the key age milestones when planning for retirement? Hey folks, welcome back to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan, with me, as always, retirement planner Mark Fricks. Mark, there are several, seven if not more, depending on who you are, but there are seven key milestones in ages as you prepare and enter into retirement. We'll talk about those today and how we can not only make sure we might make the right decisions in light of our own individual situation, but make our retirement more efficient, increase savings.

Speaker 2 0:41

And it's so crazy because folks come to us. I had a meeting yesterday with a client and they were like in 59 1⁄2, when I can turn on Social Security? There's so many different ages floating out there and it gets confusing and then they change them Just when you think you've got to figure it out. We've got two changes for this year that we're going to bring up as well. If you're driving, you might want to pull over to take notes because we'll be throwing a lot of ages out here. Or make sure you go back and listen on a podcast or YouTube our YouTube channel, one of the two but really important dates, really important ages to keep up with. And again, make sure you're efficient, because just because something says you can do something at a certain age may not mean you want to do it at that age, right. So we're going to talk about that as well today.

Speaker 1 1:25

Number one. First age in retirement planning, as far as milestones are considered, is age 50. And why is that? It's because you can make catch-up contributions to your retirement accounts Right.

Speaker 2 1:37

IRAs Roths 401 s typically have a catch-up provision the Thrift Savings Plan with the government, so all of those have a catch-up provision, the Thrift Savings Plan with the government so all of those have a catch-up provision, and I believe this year it's $7,500 for all of those except the Thrift Savings Plan. Now, don't confuse 50 with the Thrift Savings Plan. Yes, you could do a catch-up contribution with all of those accounts at age 50, up to $7,500 for the year out of your pay. But then the Thrift Savings Plan has added another age. So if you work for the federal government and you're 60, 61, 62, or 63, you can do up to $11,250 catch up. Now I don't know where that number came from. I mean, why not make it $11,000 or $10,000 or?

Speaker 1 2:20

$12,000 or whatever. We're thankful for the extra it's $3,750 more.

Speaker 2 2:24

Not everybody can afford to put that much more away. But you know, at that age you know you're getting close to retirement. You know if you've got kids they're probably close to gone or gone. So you've got a little bit of extra money there. A lot of the college costs might be gone. So but certainly we would be glad to chat with you to kind of give you some guidance on that.

Speaker 1 2:51

Really thankful for the government allowing us to put more away at some of these key points. And again, a lot of folks, these are their highest earning years, so they hopefully are able to put more away if possible. What do you think spurred some of these changes?

Speaker 2 3:04

I think the government is just seeing that there's a retirement crisis in this country. People are not saving, they're not putting away what they need to and they're just like let's give them another chance. And I mean, I remember when, you know, my kids were young, and Evan included you know we were doing everything we could to make ends meet, you know. So we would put away what we could, but whether it was school activities and expenses, clothes every year, I mean I don't have to go through all that with everybody and you're not making as much money at that point too. So having that catch up later on is a great idea. And again, I think the government's doing it because they do see the statistics of how many people have not saved or how little they've saved over the years. So giving them that last hurrah, so to speak, to keep them from working until they're 80 or whatever it may be, or being solely reliant on Social Security and things of that nature.

Speaker 1 3:57

This is also a great time age 50, to start considering whether you want or are ready to work with a retirement planning professional Right. Some might think this is a little bit early. You know you hear people say five years out, 10 years out, whatever. But this is great because you start to have these opportunities to put away more. You can work with a financial professional who can show you the best ways to maximize that, even help your budgeting, so you can put away and even let's say you are so blessed that you can maximize your contributions and catch up contributions You're like well, I still want to do more.

Speaker 1 4:31

Find a professional who can not only show you the best places to save and maximize that growth for your future planning needs, but you can go ahead and start planning for accounts that you will need in retirement. What are the goals you need to set for yourself in order to set yourself up for a successful retirement? Great age to start seeking a professional. The second age we're going to bring up is age 59 1⁄2. Now, at this point, you definitely need a retirement planner if you don't have one already.

Speaker 2 5:03

This is a wonderful age because there's no more early withdrawal penalty for retirement account distributions. It's also a time when folks that are still working typically have the opportunity to go ahead and get that 401k rolled over to personal IRAs. And somebody might say, well, why would I want to do that? Well, first of all, it's a tax-free rollover, whether it's Roth or traditional. But secondly, it gives you the world as your oyster, so to speak. Right now, if you're in a 401k or the thrift savings plan with the government, you have limited areas you can invest in. So at 59 and a half, it's kind of a freedom day of being able to roll that over into multiple IRAs.

Speaker 2 5:37

You kind of alluded to that now just now when you said, hey, getting them set up for retirement. So maybe we don't want all of our money in these six mutual funds. Maybe we need some in precious metals and some in some actively managed accounts to squeeze more return out of that money. Having somebody else watching over it for you five days a week, things of that nature, but really most important, getting lined up for that retirement and kind of seeing where does your money need to go, not only from a standpoint of what kind of management, what kind of accounts, maybe some protected principal accounts, cause if you're five years away from retirement you don't need a 30 or 40% drop.

Speaker 2 6:14

So getting that lined up, beginning to maybe some Roth conversions, get those going, cause once it comes down to that 401k or a thrift savings plan, now you can start doing conversions into Roth. So money that, because you didn't know better or whatever, went into the traditional, let's get it tax-free as well. So lots of freedom at this point. Definitely need to be working with somebody that worked for the retirement folks at this point, because if you're just working with someone that maybe your granddaddy worked with and your daddy worked with or somebody turned you on at work, that does investing. This is way beyond that.

Speaker 1 6:47

I love the conversion conversation because most people think, okay, 59 and a half, we can make tax-free rollovers, set up our accounts for retirements. But take it a step further and start developing your tax strategy, especially before you turn on social security. Let's say you're even just waiting to your full retirement age.

Speaker 1 7:05

Or Medicare. Or Medicare especially, that's great If you can convert before then that will affect the taxation of your Social Security. Any IRA withdrawal you make will affect the taxation of your Social Security. So that's an excellent time to start tax strategies as well. And Mark also alluded to some protected growth accounts as well Certain income accounts, especially annuities. If you need to use something like an annuity to create income in retirement, those really really benefit from some years to season to grow, especially if you have an income rider or something else like that. The more time you can wait and let that account grow, the more income it will produce when you're ready to turn on that income rider. So it is. You know we've worked with people who have said, hey, I retired last week, help me you know I'm retiring in two weeks.

Speaker 3 7:55

help me and we can.

Speaker 1 7:56

And we can and we've helped with people who've been. You have to make a tighter, more efficient plan. So I just insist if you are interested or have any sort of just questions about your own retirement, please contact us. You can go to our website, masterplanretirecom, Schedule your complimentary consultation. That's an opportunity to just talk about your hopes, dreams, fears, your goals in retirement. We'll run a series of reports, a 10,000-foot view of your own retirement. Okay, what if we just put the key in the ignition, turn on your retirement and let it run without any planning? What does it look like? Where are our strengths, our weaknesses, opportunities for improvement? And that is all completely complimentary. Again, that's masterplanretirecom, or call us at the office 770-980-9262.

Speaker 2 8:54

One other quick point about Roth conversions. This is not a Roth conversion episode, of course, but the key times really are from 59 and a half to age 65. Because, again, if you do a large conversion at 65 or later in your own Medicare Part B, it can double, triple and quadruple the amount of your Medicare Part B premium and that will continue for two years after you've done that. But also, we're in a season, as we've talked about before, of low taxes, and the 2017 tax cuts look like they're going to be extended with the new administration, so we have four to five more years, with all the problems we have with our deficit, and so, again, there's a window there. So one of the major things we do is tax planning, so make sure that, and that's one of the reports we'll run for you, so take advantage of that for sure.

Speaker 1 9:43

And if you are 65 or older, that also doesn't mean that you have just missed the boat on Roth conversions. It's still extremely powerful. It might be worth taking a hit a couple of years just to get some of that tax-free money in order to cover you for the next 20 plus years.

Speaker 2 9:59

Yeah, imagine never paying tax on that money ever again and when you're in, kids inherit or whoever inherits, never paying tax on that money. That's just powerful, yeah.

Social Security and Medicare Eligibility

Speaker 1 10:08

I just want to keep talking about tax planning now but we'll move on.

Speaker 2 10:12

We have some more ages to go.

Speaker 1 10:13

That's right Age number three age 62. This is when you are eligible to start collecting your social security, Should you.

Speaker 2 10:21

You know my favorite answer it depends, all right, and so that's one of the reports we run as well, along with our experience in working with people. There are so many. There are so many answers. I can you know. If I did the math, it's probably over 10,000 different ways to take Social Security, especially if you have a spouse, because one can turn on earlier, one can do it later, you can turn it on any month and get a slight increase. You don't have to wait until 67. If you turn it on at 66 and a half, you're getting more than you would have gotten at 66. So you have about 93 different times you can turn it on. Your spouse has that many times and then again it's just a matter of income needs. But also, do we wanna maximize that amount of money that will be maximized the rest of our life? And you'll get about a 70% increase if you wait from age 62 to 70.

Speaker 2 11:11

Again, that's not always the best thing for everybody. That's why, again, we have a whole meeting or two about social security and maximization and we never lock it in. I mean these discussions. You know I'm working with a client this week that they're seven years away from being eligible from social security. We still talk about it, but we understand we don't have to make that decision yet. What if the laws change? What if social Security changes? So it's not a locked-in decision, it's kind of a free-flowing income plan that allows us to make adjustments as needed.

Speaker 1 11:40

There's a lot of elements to consider, especially at pulling it in at 60,. Turning on your Social Security excuse me at age 62 will reduce your benefits from full retirement age by about 30% and that's for the rest of your life. From full retirement age by about 30%, and that's for the rest of your life. Another consideration is if you retire and turn on at 62, before you reach full retirement age, you have to be really careful about your earned income. So if you're planning on supplementing your income through employer wages, things like that, you have to be really careful not to exceed that income limit, which is what 23,000 and some change for 2025.

Speaker 2 12:13

Yeah, yeah, so, and you made more than that. You're gonna lose a dollar of benefit for every two dollars over that.

Speaker 1 12:19

So these early years in retirement are critical for being able to bring in the money that you need. And if you are limited, not only with a lower Social Security amount these first few years, but also not able to earn over $23,000, you're really cutting off the early years of retirement for that long-term growth, longevity and again, if it's a couple you've got.

Speaker 2 12:40

you know one can go and turn it on if we deem it best and that's what their desire is, and then, if the other one works, leave theirs on longer. There's so many different moving pieces to this. You know people talk about software and we have great software to do that. But it's not just the software. It spits out numbers and figures and formulas, but it doesn't get down to the needs and the wants and the desires and what your life looks like and what are you going to be doing and how long you're going to live, things of that nature. So all of that comes into play, which, again, you know you want to work with somebody that's done this more than once, absolutely.

Speaker 1 13:12

Age. This fourth age, age 65, you are now eligible for Medicare.

Speaker 2 13:18

Medicare. So a couple of things about this. We've had Medicare shows, so this is not about Medicare but it's about the age of Medicare. So a couple of things. If you are working for a company that has a group health plan and you're there beyond age 65, you're not required to sign up for Medicare Part A or Part B or get any supplements. You can stay under that group health. Just make sure, with your company and the group health company you're with, you might want to consider signing up for Part A. Many folks say that's a great idea because it can pick up maybe some little open areas of deductibles and things like that, because part A is already paid for. You've paid for it for the last 30, 40 years out of your FICA withholdings, right. Part B is something you probably don't want to pick up again if you're still covered at work. But if you aren't covered at work and you don't pick it up, I think you have about a seven month window. Three months before, seven months, that's right. Four months after 65.

Speaker 1 14:12

Three months before the month of your birthday and three months after.

Speaker 2 14:15

If you miss that, you are penalized on your premium for Part B premiums for the rest of your life, forever, forever. The only exception that I've ever been aware of is federal workers that have full benefits, their federal health benefit. They actually are not required, according to the OPM, to buy Medicare Part B. It's the only people in this country I'm aware of that don't have to have Part B. Should they get it? That's a discussion, because now you have maybe some more holes in your coverage. It's where you live, it's so many things yeah.

Speaker 2 14:48

Yeah, yeah, so there is an exception, but most of you out there you need to make sure you understand, don't miss that. And we have Medicare consultants as part of our team. We can help make the right decisions. If you need a supplement, do you want Medicare Advantage? There are positives and negatives with both of those Depends. Again, the interview process that our consultants will take on with you would be what medications are you on? What's your health like? What's your family history like, so that they can really match you up to what's best for you?

Speaker 1 15:15

Yeah, and you know this is also an age that you see a lot of people planning their retirement around, because one of the most expensive things in retirement is health care. If you retire at 62 and start taking Social Security or whatever, you've got a few years of a gap to figure out how you're going to fill that insurance need. So that's it. It's a common age. I think the average age for men retiring is 65 and women 64, if I remember correctly.

Speaker 2 15:44

I can see that, but it's very close to that.

Speaker 2 15:46

Yeah, because that group health is just so expensive and if you've got to go a year buying that for $800 a month or whatever, that's huge, and so we've had it done with clients for different reasons. But it's certainly something you want to take into account and make sure that you've run those numbers. And you know many couples want to retire at the same time and sometimes that does mean one that might be a year younger or whatever. We work out a plan for that. But anyway, a very important age, like you said, and a lot of people retire then. But I think number five is also a very popular retirement age too.

Speaker 1 16:18

Yes, this one is very popular. That's age 66 to 67. You've reached your full retirement age for Social Security, which?

Speaker 2 16:27

really means a couple of things. Number one, it doesn't mean that's when you need to turn it on. That's simply part of the formula. When you get your full benefit, if you take it before, then you get less. You take it past that, you get more. But something else is what you mentioned earlier earned income At 67, your birthday, a full retirement age whether it be 66 and a half or 67, whatever it may be.

Speaker 2 16:51

Once you pass that birthday you can earn unlimited earnings. So now you can say, hey, now I'm going to go back to work and I'm going to go back to making $60,000 a year with no penalty. So, and then the year of full retirement age. It's got a much higher limit until your birthday. So it's kind of a weird little formula here. But you can make like $60,000 earned income.

Speaker 2 17:11

So be very careful about these dates. That's why just another reason to work with somebody that understands all of this and has that background in retirement planning. But it can mess you up If you don't pay attention to that earnings test and you go back to work at 64 to make some extra money and you're taking Social Security. You may not realize it until a year and a half later when you file taxes, the IRS floats your return to the different departments to gather that information that they need and all of a sudden you get a bill in the mail for $20,000 saying oh, by the way, you owe us this. Yeah, I think you told me you can now put on a credit card.

Speaker 1 17:46

I know you can Well, actually I'm sure you can I? Think that was the military buyback for federal employees.

Speaker 2 17:57

But I'm sure you can with social security, but I don't want you to.

Speaker 1 18:00

We'll be careful Especially yeah, let's not rack up a bunch of debt in retirement, if we can help it. The next age, of course, also related to social security age 70, you're eligible to collect your maximum social security benefit.

Speaker 2 18:11

It's funny. A lot of people come up and say you're required to take it at 70. Technically, you're never required to take it. Okay, you can leave it there until you're 90 and die.

Speaker 1 18:19

You knew someone who kept working and decided he didn't need it.

Speaker 2 18:22

And went to 73 or something and I told him. I said you know, basically you've gone three years without taking something that you're due.

Speaker 1 18:29

That you paid into.

Speaker 2 18:31

Yeah, and so I think they did turn it on. They got a year worth of back pay, but they didn't get those three years back. So when you turn 70, turn it on. Unless you just are very, very wealthy and want to give it back to the government, that's your business, or you can send it to us If you don't pay if you don't need it and don't want it, take it and send it to a charity or something.

Speaker 2 18:50

There's plenty of things to do with that money that could really benefit someone else You're not going to save social Security because you're one that's not taking it. That's not going to save it.

Speaker 1 18:59

But this amount can be anywhere from 54% to 62% more than if you started collecting your benefit at 62%. So again, it's a discussion to have with your financial professional. The break-even point for waiting is somewhere between age 79 and 82, just depending. If you can and you feel like you have the longevity, people are living longer. It's well worth it to wait if you can.

Speaker 2 19:21

Yeah, yeah, because my numbers show closer to 70% greater, but somewhere in the 60 to 70% range that's a lot of money for the rest of your life. Now you did go eight years without getting a check, so when do you make that up? Well, just like Evan said, it takes about nine to 11 years of more money coming in until you finally break even with what you've received. But you also have to consider something else If you're married, you might want to maximize one of those benefits, because if one of you passes away, the other one gets the larger of the two, and so if it's 65% larger, that's a nice little death benefit payment every month. That would be much better than if you turned it on earlier. So that's again something else you've got to consider.

Speaker 1 20:02

The final age on our list and this one's people love this one Age 73,. You must begin your required minimum distributions or else you will face penalties. So you've reached the peak of the retirement savings mountain and are now descending into the distributions.

Speaker 2 20:21

Yes. So this number has changed twice in the last few years. It was 70 and a half. It then went to 72 with Secure Act 1. Secure Act 2, it went to 73 if you were born before 1960.

Speaker 2 20:36

If you're born 1960 and later, your required minimum distribution age is 75. So what is that? Well, it does not apply to Roth accounts. It applies to 401ks and IRAs and 403bs, anything else like that. That's a before tax and basically the government is wanting to get their tax money. They've given you a break all these years tax deferred. You get a tax deduction going in. Now you're being forced to take it out, which again, is why I'm a bigger fan of the Roth.

Speaker 2 21:05

Roth does not have required minimum distributions while you're alive, and so just more flexibility. But don't miss that date. Again, it's age 73. If you miss it again, there's a little bit of leniency the first time or so. But if you miss it or take it from the wrong account or take that wrong amount, is it a 20-something percent penalty now it's been changed a little bit Twenty-five, twenty-five percent penalty of the unpaid tax or the uncollected amount.

Speaker 2 21:32

So, again, if you're working with somebody that handles retirement planning, they should help you keep an eye on that. We with somebody that handles retirement planning. They should help you keep an eye on that. We we constantly monitor. We have a a list of all of our clients that are that age and older. And then you got to be careful with also also taking rmds required minimum distributions from inherited iras. That's something else you have to track and those rules have changed over the last few years so again you've got to make sure you're working with someone that's a fiduciary on top of all these rules and the rule changes for sure, oh yeah, and you have people who are grandfathered in from different eras of rules too.

Speaker 1 22:07

So there's a lot of things to keep track of, for sure. But RMDs, there's strategy behind it. You can just take it out of each of your IRAs, 401k, whatever but there are opportunities to strategize and maybe yes, you need it to supplement your income. So do that wisely. Take it from the accounts that can afford to. I mean, if you've got, depending on what accounts are doing that year, you know if you can aggregate different IRAs, you don't have to take it all from one or you split it up between all of them. You can do whatever you want. 401ks are a little bit different.

Tax Benefits of Qualified Charitable Distributions

Speaker 2 22:40

403bs you can aggregate that is true, yes, but not 401Ks. Not 401Ks, Right? So again it gets confusing. We have to look at each other a little bit and say, okay, what was that rule? Again, but yeah, absolutely so. Certain accounts, you can aggregate and take it off on one account for all of your IRAs, but you've got to be careful. And then you've got the something else that popped in my head too. Oh, is it QCD? Qcd Qualified Charitable.

Speaker 1 23:06

Distribution.

Speaker 2 23:07

So let's say you don't need your RMD, you don't want to pay taxes on it. You can actually send it directly to a charity it could be a church or other charitable foundation, as long as they're a 501c3. Charitable foundation as long as they're a 501c3 and you're not taxed on it when it goes out and the church or organization is not taxed on when it comes in. So again, if you don't need it, it's a great. We got some clients they use that as their annual tithe. Yeah, instead of giving a monthly, just give it once a year or you do it twice a year or whatever, it doesn't matter.

Speaker 2 23:32

Huge tax advantage and you can actually do that after 70 and a half, correct, I believe that still goes back to 70 and a half, not 73 or 75. So if you want to start whittling down those IRAs for future RMDs, you can start at the end as well. So we've covered a lot, a lot of ages today. We are out of time, but I want to make sure that you join us next time, or on podcast, youtube TV as well, but in the meantime, make sure you plan well and prosper, take care. This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to masterplanretirecom or call 770-980-9262.

Speaker 3 24:32

Thanks for listening and remember plan well and prosper with one of our qualified representatives prior to implementation. Advisory services offered by MasterPlan Retirement Consultants, a registered investment advisor in the state of Georgia, Mark Frick's and MasterPlan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.