Retirement on the Horizon

As I speed into my mid-50s (57 next month), first I am reminded of that famous line in a Jimmy Buffet song: Heinz 57 and French-fried potatoes (bonus points for those that know the name of the song). I, like everyone else of this age, start to think about the big R… RETIREMENT. Don’t worry, while it may be in view on the distant horizon, I love what I do too much to think about it too seriously. But for those out there who are a little more serious, here are some milestones to be aware of as you head down the road.

Age 50: Now is your opportunity to maximize your retirement savings by beginning to make annual “catch-up contributions” that exceed the typical limits to retirement accounts including 401(k)s and IRAs.

Age 59 ?: Early withdrawal penalties on IRA distributions no longer apply ― regardless of whether you are still employed or not. However, income tax will still apply to these distributions.

TIP: It’s usually prudent to avoid making withdrawals from retirement accounts until you are required to in order to benefit from the tax-deferred growth of your assets for as long as possible.

Age 62: You are now eligible to receive Social Security payments. However, just because you can start collecting Social Security payments doesn’t mean you should.

TIP: While you can begin receiving Social Security as early as age 62, full retirement age (FRA) varies from age 65 to 67 depending on your birth year. If you begin to collect before FRA, your monthly benefits will be permanently reduced. Conversely, if you start after FRA, your monthly benefits will be increased. Therefore, you may want to consider waiting until as long as age 70 to begin collecting in order to maximize your monthly benefit.

Chart Title: Early vs. Delayed Social Security Benefits

Age 65: Most Americans are now eligible for Medicare. You’re first eligible to sign up three months prior to your 65th birthday, or earlier if you have a disability. Here are important enrollment deadlines to mark on your calendar:

TIP 1: Sign up for Medicare on time as delaying enrollment can result in gaps in coverage or a late enrollment penalty fee. If you are collecting retirement benefits from Social Security, you’ll automatically get Medicare Parts A and B coverage the first day of the month you turn 65 (though you can request to drop the coverage in writing). If you’re turning 65 but not ready to begin collecting Social Security, you can still apply for Medicare through the Social Security Administration online at ssa.gov/medicare, by calling 1-800-772-1213, or by visiting your local Social Security office.

TIP 2: Missing your enrollment window, even if you decline coverage because you are still employed will lead to permanent penalties. DO NOT MISS THE DEADLINE

Age 70: If you have held out on receiving payments, you are now eligible to receive the maximum Social Security benefit.

Age 73: This is the age at which you must begin taking required minimum distributions (RMDs). You calculate these amounts based on your account balances and life expectancy. Your first distribution is due by April 1 of the year after you reach 73. Subsequent annual distributions are required by the end of each calendar year. According to the IRS, if you do not take these distributions, or if they are not large enough, you may incur a 25% excise tax on the required distribution.

TIP: If you wait until April 1 of the year after you become 73 to take the first withdrawal, you’ll have to take a second distribution by December 31 of the same year. The additional income from that second distribution could put you in a higher tax bracket and potentially substantially increase your tax bill. Consider these tax implications as you approach this milestone.

Also, please note that if you continue to work and do not own more than 5% of the business, you can delay taking RMDs from your 401(k) until the year you retire.

TIP: for those born after January 1, 1960, you won’t have to begin taking RMDs until age 75.

I hope these tips and timeframes are useful to you as you begin the journey, and know we are here to help put pen to paper and develop a comprehensive financial and retirement plan to get you to the next stage of life. It’s OK to start enjoying the cheeseburger in paradise while you are still working, but it will probably be a bit more satisfying when you are sitting on a beach in Margaritaville.

Peter Lang – Managing Director, Partner – Hightower Westchester

914-825-8631 – [email protected]

Hightower Westchester is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. Hightower Westchester and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Hightower Westchester and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Hightower Westchester and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Hightower Westchester and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.