Table of Contents
Key Financial Ages
I’m not sure why I have never written this blog before. It seems quite obvious since I get these types of questions every day from clients. Delay no more, as finally, I am taking a stab to educate on the key financial ages worth noting.
Age 18 or 21
Depending on your state and type of account this is the age in most states a minor is no longer considered a minor. The real-world implication of this financially is that at this age if you have accounts like UGMA or UTMA the dollars can no longer be “restricted’ from your children. Meaning, they’ll have free rein over these funds.
Bonus fact: At 18 if you were collecting child survivor Social Security for a deceased parent, these benefits stop at age 18.
Lovely health insurance age folks. That is right, age 26 is the last year a child can typically stay on their parent’s health insurance before having to be kicked off for their own policy. This holds true regardless if the child is employed or not. If they do not have an employer-sponsored plan they can simply go to the Marketplace to attain coverage.
Catch-up contribution provisions for retirement accounts. I know I skipped a few ages there, however, honestly, the next big age hasn’t really shown itself until now. Depending on what retirement account you have, you’ll generally be eligible for an age 50 catch-up provision. If it is an IRA, generally an extra $1,000 can be saved. If it is a plan like a 401(k) or 403(b) (to name a few) you’ll be able to squirrel away an additional $7,500 the year you turn 50. This is in addition to your normal limits.
Catch-up contribution provisions for health savings accounts. Much like the previous point, at age 55 you can save a little bit more in your H.S.A when you turn 55. Quick point of note, is unlike the retirement catch-up eligibility where it is the year you turn 50, for H.S.A’s it is the date you turn 55 that allows you to put away more funds. How much more you may wonder? $1,000 for a family plan to be exact.
Bonus fact: Rule of 55 for employer retirement plans also can come into play here. If you leave your job on or after your 55th birthday and have not yet hit 59.5, you may access your 401(k) or 403(b) funds without the IRS 10% penalty. This assumes of course your employer plan allows.
Penalty-free retirement withdrawals. This is the magical age where all those retirement accounts can be accessed penalty-free, not subject to the 10% early withdrawal penalty. This is the case for just about all retirement accounts. You will still naturally be subject to income tax, but no longer do you have to worry about any additional penalty.
Social Security Survivor Benefits. If you are a widow or widower at age 60 you may start collecting survivor Social Security benefits. It is important to make sure you know all the benefits and tradeoffs before collecting. In many circumstances, although eligible early it still may make sense to wait depending on your circumstances.
Early Social Security eligibility. At this glorious age, you are first eligible to collect your Social Security at a reduced rate. This typically means you although you can collect your benefits early, you will be subject to a 70% reduction on these benefits for life. I find this is an issue that you should work with your planner to help figure out the smart decision for you.
Medicare eligibility. This is the age you are eligible for Medicare. Even if on an employer plan, you’ll want to check with a specialist to see what you have to do so as to not jeopardize your benefit for later. Medicare is generally a huge cost savings for most, and you’ll want to make sure you start the process 3 months in advance of your milestone birthday.
Full Retirement Age for Social Security. If born in 1960 or later this is the age you may receive your FRA or Full Retirement Age for Social Security. Essentially, this is 100% of your subscribed benefit. Not much else to it to be honest as it is kind of an arbitrary age. A quick note, if you are born in 1954 or prior, your FRA is 66, in 1955, 66 and 2 months, in 1956, 66 and 4 months, in 1957, 66 and 6 months, in 1958, 66 and 8 months, and in 1959, 66 and 10 months.
Maximum Social Security benefit- Regardless of when you collect or what year you are born age 70 is the same for everyone. This is the age where you have attained your maximum Social Security benefit. Basically, there is no sense waiting any later than this date as anything later will not yield any additional benefits.
Age 73 or 75
Required Minimum Distribution age. If you have an eligible retirement plan that is subject to minimum withdrawals these are the ages you MUST start taking funds out. If born before 1951-1959 73 will be the age you are forced to take out your required amount. If born in 1960 or later you have until age 75 until you must take funds from these accounts. Do know the penalty for not taking funds is quite steep so make sure you stay on top of this at the required age.
Age 100 YOU ROCK!
There are certainly nuances to the above dates, and naturally, some other financial ages that have relevance. I thought for today’s blog, this was a great starting point as it mentions most of the bigger ages worth noting. The good news is if you are 27, you have a lot of years until age is an issue 😊.
As always stay wealthy, healthy, and happy.