Keep in mind the key steps in retirement planning


David T. Mayes

When we are young we often want to rush to key birthdays like our 16th to be able to drive, our 18th to be able to vote and our 21st which signifies a kind of last step towards adulthood. As we get older we tend to want to slow the clock down, or even let it hang, say, at the age of 39. However, we also look forward to the retreat which has its own set of key anniversaries built into the tax code and the Safety and Health Insurance Rules that we need to keep in mind. This is true not only for those approaching those ages, but also for young workers who need to factor these key dates into their retirement plans.

For retirement savers, age 50 is an important milestone. As retirement approaches, Congress has recognized that workers at this peak income stage of their careers may need and have the capacity to increase their retirement savings. accounts. For employer plans, the annual salary deferral limit increases by $ 6,500, from $ 19,500 to $ 26,000 for workers who are or will be 50 in 2021. For traditional and Roth IRA accounts, the Catch-up contribution limit is $ 1,000 allowing people 50 and over to set aside $ 7,000 per year. For workers whose employers offer a SIMPLE IRA plan, the regular contribution limit of $ 13,500 is increased by $ 3,000 for older employees.

The age of 55 triggers a few more changes. At this point, an additional $ 1,000 contribution can be made to a Health Savings Account (HSA) for those with a qualifying high deductible health insurance plan, bringing the 2021 HSA contribution limit to 4. $ 600 for people aged 55 and over with auto-only. insurance plans and $ 8,200 for those with family coverage. Building up HSA balances can offer significant benefits in retirement, as these accounts have a triple tax advantage. Contributions reduce current taxes, income grows tax-free, and income will ultimately never be taxed if used for qualifying health care expenses. In essence, they are like Roth IRA accounts which allow for pre-tax contributions.

The age of 55 is also a milestone for those looking to retire early or make a career change that may require tapping into their retirement savings. At this age, withdrawals from 401 (k) or 403 (b) plan accounts are not subject to the 10% early withdrawal penalty that is typically triggered on any distribution before age 59 and a half. Note that this exception only applies to employer plans, not traditional or Roth IRA accounts or IRA-based employer plans (SEP and SIMPLE IRA).

The early withdrawal penalty no longer applies once a taxpayer turns 59 and a half, but Roth IRA withdrawals may still be subject to this penalty. Contributions to Roth accounts can still be withdrawn tax-free, but income withdrawals may be taxable if it has been less than 5 tax years since the original Roth IRA contribution was made.

Widows can start receiving Social Security survivor benefits at age 60. The youngest age at which a workers’ benefit can be claimed is 62 years. From this age, however, a monthly income permanently reduced. Benefits will be 25% and 30% lower depending on the worker’s full retirement age, which will range from 66 to 67 depending on the worker’s year of birth. For people born after 1954, this milestone increases by two months for each year, reaching 67 for people born in 1960 and later.

Social security can also be delayed until the age of 70. Although deferred, this income stream grows by around 8% per year, allowing a 32% increase in income for those with a full retirement age of 66. Because of these deferred retirement credits, married couples should carefully plan the timing of their Social Security claims to maximize this guaranteed income stream.

Health benefits through Medicare can be triggered at age 65 and it is important to enroll in Medicare in a timely manner, unless you are still working and have employer-provided health coverage.

Finally, age 72 is now the milestone that triggers the minimum distributions required from traditional IRA and employer-sponsored retirement accounts. These mandatory withdrawals were due at the age of 70 and a half, but this start date was postponed by the SECURE law.

David T. Mayes is a CERTIFIED FINANCIAL PLANNERTM Professional and IRS Registered Agent at Three Bearings Fiduciary Advisors, Inc., a financial planning trust company in Hampton. He can be reached at (603) 926-1775 or

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