Important Ages to Remember

If there’s one thing that we all have in common, it’s the fact that we all get older. Although each one of us has our own set of circumstances that makes our situation unique, there are specific ages that set a foundation to the plans we create, and the decisions we are faced with.

Financial success is all about making the most of your specific situation and the resources that you have. However, there are a variety of ages that can impact just about everyone and you should be aware of this “financial timeline” to be sure you aren’t missing out on any opportunities (and, in some cases, avoid unnecessary penalties.)

Look at the ages below and see how they might impact your financial future, if they haven’t already.

Age 26 - Under current rules, dependent healthcare overage ends on a child’s 26th birthday. If you are under the age of 26, and on your parents’ health plan, this means you should be prepared to choose an appropriate plan to cover yourself at that time. As for any parents reading this, if you are no longer financially covering your child’s healthcare, it is likely that your insurance premiums will drop, providing an opportunity to use this additional cash flow for increased savings or paying down debt, amongst other things.

Age 50 - Specific to qualified retirement accounts (401(k)s, 403(b)s, IRAs, etc.), age 50 is the beginning of your eligibility to make “catch-up” contributions. For the year 2020, this means that you can contribute an additional $6,500/year to your 401(k) or 403(b) and an additional $1,000/year to your IRA or Roth IRA. By age 50 if you are contributing the maximum to these accounts, this allows you to take advantage of further benefits of pre-tax and Roth savings.

Age 55 - Age 55 presents two important opportunities to make note of:

  • This is the age you become eligible for “catch-up” contributions ($1,000/person in 2020) to your Health Savings Account (HSA). If you are familiar with the many tax benefits of these accounts, this would be a great time to consider saving this additional amount.
  • Lesser known is what’s referred to as the “Rule of 55.” This is an exception to the 10% penalty for taking distributions from a retirement account prior to age 59 ½. The important things to remember are that this is specific to employer-sponsored plans, you must already be age 55 or older when separating/retiring from your employer and you must continue to hold your account with your previous employer. If you roll your employer-sponsored plan into an IRA, this exception to the penalty no longer applies.

Age 59 1/2 - Referenced above, this is the age you become eligible to take penalty-free distributions from qualified retirement accounts regardless if you are still working. Also touched on above: specific exceptions apply.

Age 62 - At this time, those entitled to Social Security benefits become eligible to start collecting, at a reduced percentage of their full benefit amount. Depending on the year you were born, this can begin at about 70% of your Full Retirement Age benefit amount.

Age 65 - One of the more commonly known ages, age 65 is the beginning of traditional Medicare eligibility. If still working, you should compare benefits to your employer-sponsored coverage and the coordination of benefits between both plans.

Age 67 - For those born in 1960 or later, age 67 is the “full retirement age” for Social Security benefits. Full retirement ages are earlier for individuals born prior to 1960.

Age 70 - Age 70 is the cap on delaying Social Security benefits. There is no additional benefit increase after age 70, even if you continue to delay your benefits. Depending on your birth year, benefits could begin as high as about 124% of your Full Retirement Age benefit amount.

Age 72 - Upon the passage of the SECURE ACT of 2019, Required Minimum Distributions (“RMDs”) now begin at age 72; previously age 70 ½. At this time, you are required to begin taking out a minimum amount each year from your qualified retirement accounts, based on your account balances and age. Employer-sponsored plans are an exception, if continuing to work. This is one of the most important items to make note of, as a 50% tax penalty applies to any portion of the minimum required amount that you fail to take out.

There are a lot of variables that affect the health plans that we choose, the type of retirement accounts we use for saving, the optimal age for you to begin collecting Social Security benefits, and how we structure retirement distributions. While these ages are extremely important to have in the back of your mind, remember that this is only the tip of the iceberg and these are only a few of the major milestones along your financial journey. If you’re nearing one, it’s about time to schedule an appointment with your advisor.

As we embark on this clarifying journey together, I encourage you to submit any ideas, topics, or questions to The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual.


This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation. Clarify Wealth Management and LPL Financial do not provide legal advice or services. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.