Birthdays & Finances - Did You Know...

Life is full of milestone birthdays and reasons to celebrate. Understanding specifically which birthdays have an affect on your overall financial picture may help you to better prepare. We've outlined 10 birthdays below. Did you know that there are so many birthdays that can affect your finances?

Age 50
It’s catch-up time! Individuals age 50 and up can contribute an additional $6,500 to their 401(k)s and 403(b)s each year, for a total contribution of up to $26,000 this year. This is also referred to as a "catch-up" provision. Those age 50 and up can also contribute an additional $1,000 to their IRA or Roth IRA, for a total maximum annual contribution of $7,000. Catch-up provisions amounts are subject to change each year per the IRS.

Age 55
In most circumstances, there is a 10% federal penalty if you withdrawal money from traditional IRAs and qualified retirement accounts before the age 59 ½. However, if you separate from service between the ages of 55 to 59 ½ , you may be able to take distributions from the qualified plan of your previous employer without the 10% federal penalty. The money withdrawn would still be subject to applicable income taxes.

Age 59 ½
Once you are age 59 ½, you can begin to take withdrawals from a qualified retirement plan without a penalty. If the withdrawals are from a pre-tax source the withdrawals will be subject to applicable income taxes. Depending on your retirement plan, this is also the age that many plans allow employees to do an in-service distribution. An "in-service distribution" is a direct rollover, which is untaxed and allows you to move money from your current employer's qualified retirement plan (such as a 401k or 403b) into an IRA, while still working and contributing to your 401(k) or 403(b).
Why might you want to do an in-service distribution? This rollover into an IRA could give you more investment options and more control over how the funds are invested compared to the limited investment options typically offered in a 401(k) or 403(b) account.

Age 60
For most widows and widowers, 60 is the earliest age that Social Security survivor benefits can be started. Benefits are usually reduced when started early.

Age 62
This is the earliest age you can begin Social Security retirement or spousal benefits. It is extremely important to note that your social security benefit will be permanently reduced if you start before your full retirement age, which ranges from 66 to 67. We encourage you to read more in our Three Key Questions to Answer Before Taking Social Security or watch our Playback Recording from our recent Social Security event.

Age 65
Most Americans are eligible for Medicare at the age of 65. You are eligible to sign up three months before you turn 65, the month you turn 65 or up to three months after you turn 65. Penalties and increased premiums can occur if you miss your window to sign up. We have found that many of our clients that are nearing or in retirement have questions about Medicare and are looking for quality resources to shop options. If you would like to learn more on this topic, we suggest that you watch our playback recording from our Roadmap to Medicare event.

Ages 66 to 67
Full retirement age (FRA) is 66 for people born between 1943 and 1954. The age rises two months for each birth year after that until it reaches 67 for people born in 1960 and later. Waiting until your full retirement age to start taking Social Security means that your monthly benefit will not be reduced. However, your benefit could grow even larger if you wait past your full retirement age as outlined in our next point.

Age 70
You can expect to receive a significantly higher monthly Social Security benefit - 24% or more - if you wait until age 70 to take your Social Security benefit. Waiting until age 70 also maximizes the survivor benefit for your spouse if you are the higher earner.

Age 70 1/2
Those who are 70 1/2 or older and are charitably inclined can take Qualified Charitable Distributions (QCDs) from their traditional IRAs. QCDs reduce adjusted gross income (AGI) by giving to charities directly from a traditional IRA. Depending on your situation, this may also help you reduce taxation of your Social Security benefits and Medicare surtax. 

Age 72
Required Minimum Distribution is the amount of money that must be taken out of an individual’s retirement account in a given year based on the previous year’s December 31st value. The reason that RMD exists is because retirement assets have typically been growing tax sheltered for many years. The IRS requires that that money be taken out, so that it can be taxed. There are a couple of exceptions to this rule. 

If you are interested in increasing your financial literacy and would like to discuss your financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further. 


  1. Searches conducted January 7, 2021

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.