What To Know When You Turn 65
What To Know When You Turn 65

Certain birthdays a particularly momentous. When you turn 16, you can drive and when you turn 21, you can go out for drinks with friends. But 65 is perhaps your most momentous birthday of all.

An AARP article 5 Things You Need to Know About Finances When Turning 65 provides some very helpful information.

What 65 Means For Social Security

The first thing anyone turning 65 should consider is that hiring that milestone doesn’t mean you’ve reached your full Social Security retirement age, even though retirement advertising can often make it seem like 65 is the be all and end all retirement age. When it comes to Social Security, the full retirement age is 66 for those born between 1943 and 1954. From there, it rises in two-month increments every year un􀆟l it’s capped at 67 for people born in 1967 or later.

While you may begin receiving Social Security when you hit age 62, your monthly payment will be smaller for the rest of your life, depending on how long before your full retirement age you choose to file.

If you were born in 1955, your full retirement age is 66 and two months. But if you file for Social Security when you’re 65, that’s 14 months early. Accordingly, your monthly payment would be permanently reduced by 7.82 percent.

You should also note that filing early may shrink the survivor benefit your spouse is eligible for after your passing.

Moreover, if you file before your full retirement age and while you’re still on the job, your monthly payment may be smaller, based on your income.

It’s Time For Medicare

And speaking of retirement programs that may be vital for a lot of retirees, age 65 is also when you can enroll in Medicare. If you enrolled in Social Security before you turned 65, you’ll automatically be enrolled in Medicare. However, if you turn 65 prior to enrolling in Social Security, you must formally enroll in Medicare.

You’re afforded a seven-month window to enroll — three months before you turn 65, your birthday month, and the three months after that.

You’re permitted to enroll in Medicare on Social Security’s website even if you aren’t prepared to enroll in Social Security itself. There’s still much to know and consider when it comes to Medicare’s rules and regulations. I’d strongly urge you to talk about Medicare with your financial services professional. Also, a financial services professional may be able to assist you in enrolling in both Medicare and Social Security.

More HSA Options

Turning 65 also means you can use your health savings account — commonly referred to simply as an HSA— for additional expenses. Ultimately, an HSA may provide you with a triple tax break. First, your contributions are tax-deductible or pre-tax if your HSA is provided by your employer.

Second, the money in your HSA grows, tax-deferred. And third, you may be allowed to withdraw some money tax-free for qualified medical expenses.

Perhaps even better, when you turn 65, you may start using your HSA for more expenses than you could before that milestone birthday. While you must stop making HSA contributions once you’re enrolled in Medicare Part A or B, the money in your account may keep growing and can be used for certain medical costs in the future.

Additionally, you generally must pay taxes and a penalty if you use HSA money for something other than qualified medical expenses, but those penalties disappear when you turn 65 and you must only pay taxes on money that’s used for nonmedical expenses.

Keep Saving

If you’re still enjoying your career when you turn 65, even if you’re working part-time, you can keep socking money away. You can also continue contributing money to a Roth or traditional 401(k) at any age as long as you’re earning some level of income from a job.

Thankfully, you have a lot of options for retirement savings shortly before you turn 65, as well as after you’ve reached that age, so work with a financial services professional to construct a strategy that suits your needs and goals.