Planning for retirement - things to consider now
Planning for retirement can be an overwhelming task but the sooner you begin, the easier it will be to be financially ready. Once your retirement goals are set, you can begin determining what you need to do to achieve those goals. It is never too late or too early to begin planning for retirement.
Historic changes made through the SECURE ACT of 2019 and SECURE 2.0 of 2022
This phased-in legislation has made planning much more complex, impacting your earlier goals of when to retire and how best to prepare. Educating yourself is key to making your retirement dreams a reality and helping to avoid unpleasant financial surprises. Determining how much money you will need, prioritizing your financial goals, choosing your best retirement plan, and selecting investments to reach your goals are all part of planning for your retirement.
Social Security
If you have not done so, sign up for an account online at SSA.gov to see your social security statement through the link under tax information and resources. It will estimate your retirement benefits, lifetime earnings and estimated social and medicare taxes you have paid. Be sure to compare your earnings shown each year with your W-2 so you can correct any mistakes that may have occurred. Be proactive to get all the benefits for which you have worked hard all these years. The earliest you can claim benefits is age 62, however, you will receive reduced benefits. Full retirement age is now being phased-in up to age 67. Delayed retirement is available if you wait until up to age 70, which will increase your benefits through a phased-in amount. After that there is no benefit to waiting to collect beyond age 70. Exceptions apply (such as family, survivor, disability and supplemental) so learn what rules are important to you.
Medicare
Be sure to sign up for Medicare health insurance for individuals age 65 or older. The window to sign up is generally 3 months before to 3 months after age 65. Part A is hospital insurance, Part B is medical insurance, Part C combines A and B through Medicare Advantage Plans (HMOs and PPOs), and Part D is prescription drug coverage. Exceptions apply (such as if you are still employed) so learn the rules.
Retirement Plans
One major tax law change was for Required Minimum Distributions (RMDs) - when you must begin taking money out of your retirement plans. You are required to take out a certain amount of your 401(k), 403(b), 457(b) plans and IRAs based on the total value of your combined plans at the prior year end. This specifically excludes ROTH IRAs and ROTH 401(k)s. The age phase-in of required minimum distributions (RMDs) follows:
| Birth date | RMD Commencement Age |
|---|---|
| Before 07/01/1949 | Age 70-1/2 |
| 07/01/1949-12/31/1950 | Age 72 |
| 01/01/1951-12/31/1958 | Age 73 |
| On or after 01/01/1959 | Age 75 |
After age 70-1/2 you can directly transfer some of your RMD to a qualified charity. Known as a Qualified Charitable Distribution (QCD), this permits you to make a charitable contribution, which will reduce your taxable income. Since more individuals are using the standard deduction rather than the itemized deductions, this replaces being able to deduct your charitable contribution. Be sure to keep track of all deductible and nondeductible IRA contributions as well as work retirement plans when you change jobs.
Call us at (603) 432-0310 and let us help you plan for retirement.