Age milestones can trigger financial planning actions.

Age milestones can trigger financial planning actions.

September 18, 2024 | Bill Cass CFP®, CPWA®

Reaching certain age milestones can be significant for many different reasons. Beyond birthday celebrations and life changes, such as retirement, age milestones are meaningful for financial planning.

Milestones can trigger important tax and financial planning actions that may be missed. Talking with an advisor can help individuals and families plan and stay on track with their financial planning. In fact, age milestones play a large role when planning for Medicare or Social Security and making decisions about charitable giving or in-service non-hardship withdrawals from a retirement plan.

Many aspects of the tax code are linked to age requirements.

Milestones to watch can begin as early as age 18 for children. Here are some examples.

Many savings accounts, particularly retirement accounts, have rules around withdrawals and even contributions, that are based on age.

Most people recognize age 65 as a key milestone when thinking about retirement planning. But, important birthdays that signal rule changes around retirement savings actually begin at age 50.

For a complete list of significant milestones, see “Important age milestones for financial planning.”

Planning considerations

It is important to understand how age milestones benefit or limit planning opportunities.

Download PDF

Consider Roth conversions before reaching certain milestones

Timing a Roth IRA conversion is key when it comes to certain age-based milestones, such as retirement or claiming Social Security. For example, converting to a Roth IRA shortly before age 65 may negatively impact Medicare premiums. This is because Medicare considers income from two years prior to enrollment at age 65 when calculating the amount of the premium. Those at higher income levels may face higher premiums.

Consider a qualified charitable distribution (QCD) if over age 70½

If you are not relying on a required minimum distribution (RMD) to meet current income needs, and if you are planning to claim the standard deduction, consider donating IRA assets to a qualified charity. A special provision of IRAs allows account owners to donate up to $100,000 tax free each year to charity.

In-service, non-hardship withdrawals

Some 401(k) plans allow in-service, non-hardship withdrawals—without providing proof of hardship—if the participant has reached age 59½ or has met the requirements specified by the plan document. These participants have the option to directly transfer savings to an IRA without penalty or withholding, assuming certain conditions are met. Transferring savings from the employer plan to an IRA may allow access to a broader range of investment choices, for example.

It might pay to delay Social Security

One of the biggest mistakes retirees make is deciding to begin Social Security benefits too soon. In fact, about 60% of workers sign up for Social Security before reaching full retirement age. At this point, the benefit is significantly lower and may be more likely to be subject to a reduction in benefits for those still working. By delaying the start of Social Security benefits, retirees will receive higher benefits. In essence, they receive an 8% raise for every year they delay taking benefits up to age 70.

Take distributions before your RMD age

The original SECURE Act raised the RMD age from 70½ to age 72 effective in 2020. The new law further extends the RMD age to 73 in 2023 and eventually to age 75 in 2033. Even with the RMD age increased, you may consider accelerating income before the tax rates expire at the end of 2025, or if you are in a lower tax bracket. For those that are already subject to RMDs, consider taking larger RMDs than required to “fill up” favorable tax brackets, depending on personal tax circumstances.

More in: Retirement/Income, Taxes

Any Putnam funds referenced in the above articles are not available for sale outside the United States.

Services provided by Putnam may not be available in all countries or to all investors. This content is not an offer to any investor who is not qualified under local law.

The views and opinions expressed are those of the fund manager above, are subject to change with market conditions, and are not meant as investment advice.

This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and objectives of any specific investor. Putnam, which earns fees when clients select its products and services, is not offering impartial advice in a fiduciary capacity in providing this sales and marketing material. This information is not meant as tax or legal advice. Investors should consult a professional advisor before making investment and financial decisions and for more information on tax rules and other laws, which are complex and subject to change.

All funds and investment products involve risk, and you can lose money. See the prospectus for details. Any economic and performance information is historical and not indicative of future results.

If you are a U.S. retail investor: Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, contact your financial representative, call Putnam at 1-888-4-PUTNAM (1-888-478-8626), or click on the prospectus section to view or download a prospectus. Please read the prospectus carefully before investing.

Putnam Retail Management, LP and Putnam Investments are Franklin Templeton companies.

In the United States, mutual funds are distributed by Putnam Retail Management.