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Financial Birthday Timeline

Despite being a little less exciting, some of the birthdays later in life present an opportunity to open a new door in the financial world.  Below is a breakdown of the milestones that are unlocked over the years that most people should become familiar with:

0-17: The Kiddie Tax applies to any unearned income over the threshold which results in that income being taxed at the parent’s tax rate and not the child’s rate.  Unearned income under $1,150 qualifies for the standard deduction, the next $1,150 is taxed at the child’s rate (close to 0%), and then any unearned income over $2,300 is taxed at the guardian’s tax rate.

18-23: The Kiddie Tax still applies to any children who are full-time students until they reach age 24.

21: The Pennsylvania age of majority when the child legally gains control of an UGMA or UTMA account to use under his/her own discretion. Note: age varies by state.

24: After age 24, U.S. Savings Bonds can be purchased and, if used for education purposes, cashed in tax-free any time in the future if the education expenses are for yourself, your spouse, or a dependent. Note: must be under MAGI levels and can not file “married filing separately” on returns.

50: Age 50 starts the catch-up phase in which your maximum contribution levels increase for both IRAs and company-sponsored retirement plans. At 50 you are able to contribute an additional $1,000 to either an IRA or a Roth IRA. You can also contribute an additional $6,500 to a 401(k), 403(b), or 457 plan.

55: Under the “separation from service” clause of the Internal Revenue Code, employees can take penalty-free withdrawals from a company retirement plan at age 55 upon retirement, resignation, or discharge from the company. (Age 50 for distributions from a government plan to a retired police officer, firefighter, or emergency medical services provider).

Employees in an employer-sponsored stock ownership plan are able to diversify their holdings to alleviate risk levels from their retirement plans.

59.5: Penalty-free withdrawals can be taken from company retirement plans. Note: it is not always in the best interest to take these withdrawals, but they are available without penalty.

60: A surviving spouse can begin receiving Social Security benefits at 71.5% of the deceased’s full retirement primary insurance amount (PIA) at death.

64 & 9 Months: Sign up for Medicare Part B in order to pay lower health insurance premiums for Medicare. Part B premiums may increase 10% for each 12-month period you fail to sign up.

65: Now eligible to receive Medicare upon enrollment if you worked for at least 10 years in Medicare-covered employment and are a resident of the United States.

Can withdraw money from your HSA without penalties. If you use HSA funds for nonmedical expenses, you will have to pay income tax.

66: Individuals born between 1943 and 1954 are now eligible to receive full retirement Social Security benefits (100% PIA).

67: Individuals born after 1960 are now eligible to receive full retirement Social Security benefits (100% PIA).

70: For individuals who waited to take Social Security benefits, an increased benefit amount may be claimed at age 70. There is no additional benefit for delaying any longer.

72: Annual required minimum distributions (RMDs) are now required from IRAs and employee retirement plans (Roth IRAs are exempt). Failing to take RMDs will result in a 50% penalty. Withdrawals start April 1st following the year that the account holder reaches age 72 or the year after retirement for certain employer-sponsored retirement plans.

100: Most Universal life policies mature from a policy to a cash payout. Age of maturity varies among insurance providers.

If any of these financial milestones or concepts generate additional questions or concerns, please reach out to a Hefren-Tillotson Financial Advisor for further assistance.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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