Accounting and Tax Planning Sections

Baby Boomers by the Numbers

There Are Financial Milestones That Come Along with Many Birthdays

Jim Kenney

Jim Kenney

As Baby Boomers age, I’ve found a great many of them to be unaware of some of the financial milestones that came with each birthday.

Having always been a numbers guy, I thought it might be a good time to share some important financial-planning thoughts for some of these important digits.



The 401(k) annual contribution provision allows for a catch-up contribution of $5,500, increasing the allowable contribution to $23,000 in 2013. IRAs have a $1,000 catch-up provision, and the SEP-IRA maximum contribution goes to $51,000.



If you are 55 or older and you lose your job, then you are allowed to take a distribution from your 401(k) plan without incurring the 10% penalty.  Keep in mind that you will still have to pay taxes on the amount distributed.


59 1/2

This is the age when you can begin taking withdrawals from whatever type of retirement account that you have without having to pay that dreaded penalty. If the original contributions weren’t taxed, then the withdrawals will be. However, Roth IRAs are tax- and penalty-free if the account is at least five years old.



You can begin collecting Social Security benefits (this can occur earlier if you are disabled) if you are willing to take a haircut on your benefit of about 25%. Also, if you continue to work and make above a certain amount, the benefits may be further reduced. This decision takes some planning and needs some thoughtful consideration.



You can now apply for Medicare. (You will be automatically enrolled if you already started collecting on your Social Security benefits.) Most financial planners recommend you take this step three months in advance of your birthday.



At the IRS designated full retirement age, you can begin collecting your full retirement benefits regardless of whether or not you are still working. If you delay collecting until age 70, your benefit will increase by 8% per year.



That 8% increase benefit stops at age 70, so I can’t think of a good reason not to take advantage of the Social Security system that you contributed to.


70 1/2

You are now required to take withdrawals from your tax-advantage retirement accounts unless you are still working or it is in a Roth IRA that you either started or inherited from your spouse. The required distributions are computed based on a life-expectancy formula and must be withdrawn by Dec. 31 (first-year distributions can be delayed until April 1 of the next year, but that will double year two’s income). You should consider consolidating your IRAs to make the calculation easier.

That’s a quick look at your decisions by the numbers. Now it’s time to crunch the numbers and make some decisions.


James P. Kenney, CPA, MBA is a member of the firm with Wolf & Co., P.C., which has several offices in the Northeast, including Springfield; (413) 747-9042.

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