Erin: Jordan, so good to see you. We are talking retirement milestones today, the ages that trigger big financial decisions. There are a handful of ages that can dramatically shape your retirement strategy, affecting everything from taxes to health care. Some dates unlock benefits; others create costly mistakes if missed. Let’s go in order. We’re going to start with age 59 1/2. This is when you can take those distributions from your retirement accounts without penalty, and you are eligible for the in-service rollover. Tell me about both.
Jordan: Yeah, it’s kind of crazy. We stopped counting a half years and when we were young, but now we have half years at 59 1/2 because the IRS at that age 59 1/2 allows us to stay qualified accounts, those IRA distributions without that 10% IRS penalty. Also, this opens up the door for many 401K plans that they can now roll over their 401K into an IRA, giving them more control, giving them more kind of diversification options and maybe even lower costs by rolling that 401K to an IRA. So, 59 1/2 unlocks a lot of doors, whether you need income or want to diversify. And we send out email blasts and remind people once they hit that age, give us a call. See how we can help.
Erin: Next, we have age 62. This is when you are first eligible to claim Social Security. But should you?
Jordan: Yeah, you’re eligible to take your benefits, but at a 30% reduction. And as time goes on, as you see in this chart, you know, you get less and less of a deduction based on your full retirement age, you get 100%. Now we like to tell people there’s no perfect answer to Social Security. It really depends on your plan, depends on your spouse, depends on your health. But when we overlay all those different things, we can give you that plan, that educated number when you should take Social Security. But at 62, you are eligible unless you’re a widow. If you’re a widow benefit, it could be at age 60. But for most people it is at age 62.
Erin: All right, next we have age 65. This is when you were eligible for Medicare. And this is a date you do not want to forget. Why is that?
Jordan: You don’t want to forget this date. Because if you miss it, you miss it. You’ll be penalized. So, we like to make sure that we cover all of our clients bases when it comes to Medicare. We actually do that all in house. So usually, it’s about three months before you turn 65. You reach out to our team, or our team reaches out to you. Make sure we have a game plan for that. And if you have an employer plan of over 20 people, you may not have to go on a Medicare, but you still have to file for Part A. These are things that we get ahead of to make sure you’re not penalized and to make sure you have that healthcare coverage at the cheapest cost possible.
Erin: It’s so nice when you have a team who’s reaching out to you proactively, so you don’t miss these dates as well. That’s also a great point. On that note, Jordan, age 70 1/2. This is a really important age for people who are charitably inclined when it comes to tax strategies. And as you and I were talking offline, often overlooked,
Jordan: This one gets me a little fired up because I see people with multi millions of dollars and they have money in IRAs and they love giving to charity. They’ve been giving to charity for years. And we review this and we look at your portfolio like, oh, why aren’t you doing QCD qualified charitable donations where you give from that IRA directly to the charity because you’re not taxed on it. And they’re like, well, my financial guy never said anything. And it just baffles me because it’s such a simple strategy. But most big box firms and most advisors, honestly, they just focus on investments. They don’t even look at the tax planning aspect of things. And if you ask them a tax question, they say, go talk to your accountant. But this is such a simple strategy, and you don’t have to wait till your RMD age at 73 or 75. You can do this at 70 1/2. So, if any of you are 70 1/2 and you give to charity, give us a call. Let’s save you some tax money which can give more in your pocket or maybe even give more to the charities of your choosing.
Erin: Right, right. If you’re putting money in the collection plate, there’s probably a better way to do it when it comes to taxes. Good point. And then as you mentioned, RMD, we do want to talk about age 73. For most people, this is when you will start taking those required minimum distributions.
Jordan: And what does that mean? RMD required minimum distribution. It means the government forces you to take money out of your accounts because they want you to go on vacation, they want you to enjoy life, or they just want that tax revenue, right? It’s been deferred for 20, 30, maybe 40 years. Now, they force you to take that money out, which could mean a higher increase in your tax rates. It could be more in Medicare excess premiums, and you really have no control. Now we want to put that control back into your pocket, so to speak. To have a plan so that we’re not blindsided by those RMDs, that we do a real good plan to be tax efficient so you can keep more of that money. And those RMDs don’t push you into higher tax brackets or adverse Medicare excess premiums.
Erin: So much to keep track of. Jordan, if somebody would like to come in, make sure that all of these dates are on their calendar. Like you said, you make sure your clients don’t miss any of these important dates. What’s the best way to reach you?
Jordan: Yeah, they can give us a call at 847-499-3454. We’ll create a plan not only on these dates, but for decades to come and make sure they have confidence and clarity in everything they do, so they can sleep good at night and have that peace of mind.
Erin: All right, Jordan, thank you so much for your time. And everybody, please stand by for the QR code at the end.
Jordan: Thanks, Erin.
