Turning 65 Can Be A Momentous Birthday!

An AARP article 5 Things You Need to Know About Finances When Turning 65 provides some potentially useful information about why turning 65 is such a big deal.

Not The Full Retirement Age

The first thing you might be aware of about turning 65 is that it’s not the Social Security full retirement age (FRA), even though retirement marketing can sometimes make it seem like it is. With Social Security, the full retirement age is 66 for those born between 1943 and 1954. It then rises in two-month increments each year until it maxes out at age 67 for those born in 1967 or later.

You can begin claiming Social Security benefits as early as age 62, but your monthly payment will be smaller than if you wait longer to file.

A Reduced Benefit

How much smaller are we talking?

If you were born in 1955, your full retirement age is 66 and two months. If you enroll in Social Security at age 65, you’re enrolling 14 months early. That means your monthly benefit would be permanently reduced by 7.82%. Also, keep in mind that enrolling early can also reduce the survivor benefit your spouse may receive after your death.

Additionally, if you file before your full retirement age AND while you’re still working, your monthly payment may also be reduced based on your income.

Medicare Matters

Speaking of retirement programs that are essential for many retirees, age 65 is also when you are eligible to enroll in Medicare, a federal health insurance program. If you happened to enroll in Social Security prior to turning 65, you’ll automatically be enrolled in Medicare. But if you turn 65 before you enroll in Social Security, you must formally enroll in Medicare. You have a seven-month window to enroll — three months before you turn 65, your birthday month, and the three months after that.

You can enroll in Medicare on the Social Security website even if you aren’t ready to sign up for Social Security.

This barely scratches the surface with regard to Medicare’s rules and regulations, so you may want to discuss the program with your financial services professional. Also, your financial services professional may be a good resource as you prepare to enroll in both Medicare and Social Security.

HSA Flexibility

Another thing to be aware of when you turn 65 is that you are eligible to use your health savings account, or HSA, for more expenses. In fact, an HSA may supply you with a triple tax break. First, your contributions are tax deductible or pre-tax if your HSA is through your employer. Second, the money in your HSA grows tax deferred. And third, you may be able to withdraw money tax free for qualifying medical expenses.

Perhaps best of all, when you turn 65, you can begin using your HSA for more expenses than you could before that birthday. While you must stop making HSA contributions once you’ve enrolled in Medicare Part A or B, the money in your account may continue to grow and can be used for some future medical expenses.

Also, you often have to pay taxes and a penalty if you use HSA money for something other than qualified medical expenses. Those penalties vanish when you turn 65 and you only have to pay taxes on withdrawals that are used for nonmedical reasons.

Don’t Stop Saving

So, do you have to stop saving for retirement when you turn 65?

No!

If you’re still enjoying your job when you’re 65, even if it’s on a freelance or part-time basis, you can keep saving for retirement. You can continue dedicating money into a Roth or traditional 401(k) at any age as long as you’re earning some income from a job.

You have numerous retirement savings options shortly before you turn 65 as well as after you’ve reached that milestone, so work with a financial services professional to develop a strategy that fits your needs and goals.

SOURCE
https://www.aarp.org/retirement/planning-for-retirement/info-2020/5-things-to-know-at-65.html

Advisory services offered through Buska Wealth Management, LLC an SEC Investment Advisor. Insurance products and services are offered through Buska Retirement Solutions, Inc., an affiliated company.

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