Watch Out, Boomers, Here Comes 70

Bloomberg Businessweek (Europe) - - FO­CUS ON/ RE­TIRE­MENT - “Once you hit 70½, you’re re­ally out of the sweet spot”

Manda­tory pay­outs from sav­ings plans may trig­ger new taxes time you’ve been taught to build, save, in­vest, sac­ri­fice. Sud­denly the gov­ern­ment at age 70 ½ says, ‘Now we’re sick and tired of wait­ing for you to drop dead. We want our money back.’”

The scale of dis­tri­bu­tions for boomers, who were born be­tween 1946 and 1964, will put fi­nan­cial ad­vis­ers in uncharted ter­ri­tory. “This year is the largest pop­u­la­tion of first-timers tak­ing their min­i­mum dis­tri­bu­tions we’ve ever seen,” says Maura Cas­sidy, di­rec­tor for re­tire­ment prod­ucts at Fidelity In­vest­ments. “That’s over 90,000 clients. With­draw­ing is a new con­cept for these peo­ple, and we want to make sure they do it right, be­cause of the 50 per­cent penalty.” She says the av­er­age IRA bal­ance for its 70-year-old clients is about $200,000.

The IRS has a work­sheet to help you de­ter­mine how much to with­draw each year. The RMD in 2016 starts at 3.6 per­cent of the yearend bal­ance on your tax-de­ferred re­tire­ment ac­counts and grows each year: By age 80 you’re tak­ing out 5.3 per­cent, and by age 90, 7.9 per­cent. Although the 50 per­cent penalty on missed or un­der­size with­drawals is steep, tax fil­ers can ask the IRS to waive it. “File Form 5329 with your tax re­turn and say you missed it be­cause you were con­fused or had poor fi­nan­cial ad­vice,” Slott says.

Man­ag­ing your RMDs isn’t the only fi­nan­cial chal­lenge await­ing those who turn 70. That’s also the age when an in­di­vid­ual can be­gin col­lect­ing the max­i­mum ben­e­fit for So­cial Se­cu­rity. Those who opt to re­ceive ben­e­fits at the ear­li­est age of 62 re­ceive about 25 per­cent less per month than a 66-year-old re­tiree and 43 per­cent less than a 70-year-old one. Boomers who have the fi­nan­cial where­withal should def­i­nitely hold off un­til 70.

Still, de­lay­ing the pay­outs can raise

Pro­jected share of U.S. pop­u­la­tion 70 or older

18%

9%

0

Newspapers in English

Newspapers from Bahrain

© PressReader. All rights reserved.