As we approach the cooler months, it is likely an important time to check in on your parents and aging relatives regarding their physical and financial health, to ensure they were not derailed by last year’s events. Financial conversations aren’t always easy but making sure your loved ones are properly prepared is a great way to show your love and care for them.
Below are a few age groups and pertinent topics that should be considered. We hope this will help prompt conversations with your elders.
Ages 50-65
- Depending on how well they have planned for retirement, catch-up contributions (over and above the general contribution limit) for most retirement plans are available once you reach age 50. For 401(k)s and 403(b)s, the catch-up amount is $6,500 for 2021. For SIMPLE IRAs, the catch-up amount is $3,000. For Traditional and Roth IRAs, the catch-up amount is $1,000 for 2021.
- Long-Term Care (LTC) is one of the biggest risks to a couple’s retirement plan. The monthly median cost of a nursing home in the U.S. is $7,756 (semi-private room)1. Prior to age 60, insurance solutions should be reviewed as a way to protect against a potential significant expense.
- If retiring at age 55 or later and they have a 401k or other qualified retirement plan, distributions from such plan are not subject to early withdrawal penalties.
- Once age 59½ is reached, early withdrawal penalties go away for all retirement accounts.
- 62 is the earliest age to be eligible for Social Security benefits. A comprehensive analysis should be done to help determine the optimal time to begin collecting benefits.
Ages 65-75
- Eligibility for Medicare begins at age 65. There are many factors involved and if they are still working and covered by employer benefits, not all parts of Medicare are required. Consideration of supplemental policies is advised as well.
- If delaying Social Security benefits, there is no additional advantage to waiting once age 70 is reached, so it’s important to claim benefits at age 70. Paperwork should be completed a few months prior to when the benefit will begin.
- For those charitably-inclined and without a need for all of their retirement assets, once age 70½ is reached, gifts of up to $100,000 per year from an IRA directly to a qualified charity can be excluded from income for tax purposes. There are possible reductions to this tax benefit if contributions are still to be made to the IRA.
- Required Minimum Distributions (RMDs) begin at age 72. If continuing to work, and if not 5% owner of the company, then RMDs from a 401(k) or other qualified plan can be delayed until retirement.
Ages 75+
- Estate planning documents should be reviewed to be sure they are updated based on current state law, and also ensure their wishes are followed.
- Are there plans to age in place at home or to move to a different home or even a community? If planning to age-in-place, modifications to the home should be made before they are needed, and any major items like roof, siding, paving, or HVAC should be reviewed so they are not a worry. Continuing Care Retirement Communities (CCRCs) are rising in popularity.
- Conversations around driving can be difficult. The MIT Age Lab is full of helpful tips for this conversation and other considerations in the aging process. https://agelab.mit.edu/resources
We are always here as a resource for our valued clients, their families, and friends. If you have question or would like a second opinion on your parents’ or loved one’s financial situation, contact us today!
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.