Timing Is Everything
Timing Is Everything
Cliche? Yes. But nonetheless, true. Take a look at any history book and you’ll find the importance of timing on every page. My favorite example comes from the Revolutionary War.
George Washington crossed the Delaware on Christmas morning to fight a regiment of Hessians stationed in Trenton. An aide to Washington wrote: “They make a great deal of Christmas in Germany, and no doubt the Hessians will drink a great deal of beer and have a dance. They will be sleepy tomorrow morning. Washington will set the tune for them about daybreak.” The aide was right on all accounts.
The key for George and company in winning the battle was their awareness of a time-bound opportunity and they took advantage of it. Just the same, there are time-bound opportunities for you to take advantage of and plan for in retirement, and they are typically based on your age.
Here are some of the important ones to keep in mind:
Age 50 - Catch-up Provisions
You are allowed to make what are called “catch-up provisions” to your 401(k)s, IRAs and Roth IRAs, allowing you to make larger annual contributions to these accounts. Normally, the maximum you can contribute per-year, per-person in a traditional IRA in 2017 is $5,500. However, if you meet certain criteria, the catch-up provision would allow traditional IRA owners to contribute $6,500.
Determining the catch-up amount and eligibility requires specific plan and participant information. For more information. For more information, head to IRS.gov .
Age 55 - 401(K) Withdrawal Exception
If you quit, retire or are laid off in the calendar year of your 55th birthday or later, you can make 401(k) withdrawals without paying the 10% early withdrawal penalty or waiting till age 59 ½ to begin distributions.
This withdrawal exception applies to all ERISA-qualified, employer-established defined contribution plans, which includes 401(k), 403(b), 501(a), and others, including the federal TSP. This exception DOES NOT apply to IRA accounts.
Age 60 - Widows Social Security Benefit
If you are a widow/widower and are at least 60 years old, you can begin receiving your Social Security payments 2 years early. If you decide to take advantage of the early benefits, they are reduced a fraction of a percent for each month before full retirement age.
Also, those who receive a widow/widower's benefits, and will qualify for a retirement benefit that is more than their survivors benefit, may switch over to their own retirement benefit beginning at age 62 and as late as age 70. The rules are complicated and vary depending on your personal situation, so talk to a Social Security representative about the options available to you.
Age 65 - Medicare
This one is important because it affects almost everyone and if you don’t act within a certain time frame, you could be punished for it. At age 65, the government requires you to sign up for Medicare and they give you a 7-month Initial Enrollment Period to do so.
This 7-month period begins 3 months before your 65th birthday month, and ends 3 months after your 65th birthday month.
The unfortunate part is that if you don’t sign up for Medicare Part B when you’re first eligible, you’ll have to pay a late enrollment penalty. You'll have to pay this penalty for as long as you have Part B and could have a gap in your health coverage.
Remember, everyone’s situation is different and it’s up to you to find out whether or not these dates apply to yours. It’s worth noting that Bull Moose offers a free Medicare consultation for those in or nearing Medicare’s 7-month enrollment period. Medicare can be complicated and it’s very important to get it right the first time.
If you’d like to have a chat and ask any questions, feel free to send us a message or give us a call at (419) 517-4477.