I think I can speak for everyone in saying that we are glad to see 2020 in the rearview mirror! Here’s to great 2021!
There are a set of important ages when it comes to retirement planning and we thought it would be a great way to kick off our newsletters this year with a reminder for all of those who might be having a key birthday in 2021!
50! – Happy birthday to everyone turning 50 this year! As a present the government will allow you to make “catch-up” contributions to your retirement accounts. Here is what the breakdown looks like:
| Account Type | Max Contribution | Catch Up |
| IRA/Roth IRA | $6,000 | $1,000 |
| SIMPLE IRA | $13,500 | $3,000 |
| 401(k)/403(b)/457 | $19,500 | $6,500 |
55! – A big happy birthday to these folks as well, as you are getting a bit older and perhaps a little more worried about healthcare costs the government allows catch up contributions your HSA (link blog post):
| Account Type | Max Contribution Ind/Family | Catch Up Ind/Family |
| HSA | $3,600/$7,200 | $1,000/$1,000 |
59 ½! – This is a big year for you! You are now allowed to take money out of your retirement accounts without incurring a 10% penalty! This is the year your retirement assets become available to you for income if you need it. It is important to remember that any money you distribute from a tax deferred account will be classified as taxable income so plan on writing Uncle Sam a check at the end of the year if you do make distributions. It is important to coordinate accounts for retirement income to minimize your tax obligation, remember to speak to an advisor if you are not sure how to do this.
62! – This is the age when you are eligible for your reduced social security benefits. If you turn 62 in 2021, you are entitled to roughly 70% of your full retirement benefits. Be careful though, if you elect to take your benefit early, you will be locked into a lower monthly income and miss out on your full benefit. A sound financial plan should be in place before you decide to collect your benefit (especially early at a reduced amount!).
65! – Congrats! You are now eligible for Medicare! Medicare enrollment begins 3 months prior to your 65th birthday and spans from that date until 3 months after the month you turn 65 so don’t forget to enroll! If you miss that window, you will have to wait for general enrollment which will delay your coverage for several months and could leave you with a gap in health insurance (which you definitely do not want!). This is also a great time to begin looking into Medigap policies to fill certain “gaps” in the coverage Medicare provides on its own. We recommend speaking to an advisor to see what might be appropriate for you.
66! – If you were born in 1955, this is the year (66 & 2 months to be exact) that you are entitled to your full social security benefit! Once you hit this age, you are no longer penalized for taking your benefit early! You can also earn as much as you would like (if you’re still working) while collecting your benefit and not be penalized at all. Again, before you elect to claim your benefit be sure to have a plan in place so that all your retirement income streams are coordinated and working well together.
70! – If you have delayed taking your social security benefit make sure that you’ve claimed it by your 70th birthday. After that age there are no more delayed retirement credits, your benefit no longer grows for delaying any further so if you wait past this birthday, you are literally letting income slip through your fingers! Long story short – IF YOU HAVEN’T CLAIMED SOCIAL SECURITY BENEFITS BY THE TIME YOU TURN 70 GO DO IT NOW!
72! – The Secure Act, passed in late 2019, raised the age that people must take their first required minimum distribution to age 72 from 70 ½ and was supposed to take effect in 2020. However due to the pandemic required minimum distributions were suspended in 2020. So far, the exemption on required minimum distributions has not been suspended for 2021 so if you are turning 72 this year make sure to make them! Failure to take the required amount results in a 50% penalty so make sure you distribute what is required! Speak to your advisor to find out what your RMD obligations might be this year and how you should plan accordingly for the tax implications of this additional income.
We hope that everyone has a healthy, happy, and prosperous 2021!
Innova Wealth Partners, LLC (“Innova”) is a registered investment advisor. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.
Readers of the information contained on these performance reports, should be aware that any action taken by the viewer/reader based on this information is taken at their own risk. This information does not address individual situations and should not be construed or viewed as any typed of individual or group recommendation. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal counsel before implementing any securities, investments, or investment strategies discussed.
The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Innova does not provide legal or tax advice. Innova cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Innova makes no warranties with regard to such information or results obtained by its use. Innova disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.