As the calendar turns to a new year, we all ought to raise a glass to congratulate our fellow Americans who will reach a milestone in 2017 of achieving their dreams of retirement!
Every day, 10,000 baby boomers hit the typical retirement age of 65, a trend that is expected to continue until 2030. Not all of those individuals will have the financial resources to retire, but many of them will hit the career finish line and transition to their new lives.
If you are among that fortunate group of new retirees in 2017, here are a few practical financial considerations that you may want to review:
The Social Security decision
Depending on your current age, one of the most important decisions you’ll need to make is when to claim your Social Security benefits. Beginning in 2017, new retirees who enroll for Social Security benefits, but were born in 1955, won't reach their full retirement age until age 66 years and 2 months. Starting this year, over the next five years the full retirement age will increase by two months to account for lengthening life expectancies. So by 2022, the new full retirement age will be 67 years for those born in 1960 or after. The decision you’ll have to make is whether to “wait longer or receive less,” as The Motley Fool summarizes. You can boost the amount of money you receive by delaying your claim until age 70, with an 8 percent increase in the amount you can draw for each year you hold off.
Enroll in Medicare
You officially become eligible for Medicare health insurance during the seven-month window surrounding your 65th birthday, so make sure that you sign up during this initial enrollment period or you could be subject to penalties down the line – the exception would be if you work past age 65 and receive group health insurance through your job, in which case you need to sign up within eight months of retirement or the coverage ending. Medicare costs are projected to increase and health care costs are a significant burden on retirees; it’s important to maximize your available benefits.
Cover your RMDs
Generally speaking, you must start taking withdrawals from your IRA, Annuity or other retirement plan – known as a Required Minimum Distribution (RMD) – when you reach age 70 ½. Your first RMD will be due by April 1st of the year that you turn 70 ½, subsequent RMDs will be due by December 31st each year. You can withdraw more than the minimum required amount if you choose, just keep in mind that your withdrawals will be included in your taxable income except for any part that was taxed before or that can be received tax-free. The penalty for missing an RMD is steep: 50 percent of the amount that should have been withdrawn, in addition to the income tax due.
Take a look at your life insurance policy and evaluate whether it’s still needed or affordable now that you’ve entered the retirement years. Some seniors decide the coverage just isn’t needed anymore because their kids are no longer dependent on Mom and Dad for money. Other seniors have seen their premiums go up in recent years and now find the policy is too costly to maintain. If one of those scenarios hits close to home, you may want to consider selling the policy to a third-party investor for immediate cash payment, known as a life settlement transaction
Each year, more than $100 billion worth of life insurance owned by Americans over the age of 65 is lapsed or surrendered back to the insurance companies that sold the policies – mostly from a lack of knowledge that an unneeded or unaffordable policy may be sold. Candidates for life settlements are typically aged 70 or older, with a life insurance policy that has a death benefit of more than $100,000, although policies of all sizes owned by seniors of all ages may be sold if there are health problems involved. The sale of a policy can bring you roughly seven times more money than the cash surrender value of your policy.
All of us at the Life Insurance Settlement Association send our warm congratulations and best wishes to 2017 retirees. May your golden years be everything you dreamed they would be . . . and more!