We all know that in our economic environment a good credit score can be an added plus when we find ourselves needing to make a large purchase, deal with a crisis, or just enjoy taking a well-deserved vacation.
Planning ahead for any eventuality is imperative when contemplating retirement, especially when you consider that we have to begin the process 40 years prior to the actual event.
Age milestones keep us on track for retirement, but watch for pitfalls
Age 50 — This is the age when most of us begin to think seriously about our retirement planning. You can now use the catch-up provision made available on your qualified retirement accounts. Regular IRAs and Roth IRAs allow you to increase your contributions annually by $1,000, and your 401(k) contribution can increase as much as $5,500 annually.
Age 59 ½ — With an IRA, if you run into an adverse financial climate or illness — or just need additional funds available — you can withdraw a portion of your money without the 10 percent withdrawal penalty charged previously. You will, however, pay taxes on the money you withdraw. You should be aware that even though a Roth IRA does not have the tax consequences associated with regular IRAs (because it uses after-tax dollars), you must hold the Roth IRA for a minimum of five years or you will still pay taxes upon withdrawal.
Age 62 — At this age you may apply for your Social Security benefits, however it may not be an advantageous thing to do. Applying for benefits now will reduce the amount you receive to only 70 percent of the full benefit. If you continue to work, your benefits may be taxed or even withheld. Taking this into consideration, holding off on applying for Social Security until your full retirement age of 66 or 67 is still your best option.
Age 65 — It is critical that you file for Medicare at this time even if you will still be working and you’ll still be covered by your employer’s insurance. Medicare requires everyone to apply for their coverage within a seven-month window of three months prior to their birth month and three months after their birth month. Failure to apply will cause your future Medicare premiums to be 50 percent higher, so this is an important milestone to remember.
Age 66 / 67 — At this time, depending upon your birth year (age 66 for those born between 1942 and 1954), you will be eligible to receive your full Social Security benefit even if you are still working. Be cautious, however, to allow for tax ramifications, as benefits are taxable. If you decide to file early at age 65 you will receive about 87 percent of your benefit and your spouse will in turn receive only 50 percent of that reduced benefit.
Age 70 — Up to now you have received a Delayed Retirement Credit of 8 percent annually for not filing for Social Security benefits at your age of eligibility. After age 70 this is no longer applicable, thus applying for benefits should no longer be delayed.
Age 70 ½ — This age is crucial to your retirement, as distribution requirements demand you begin to take the minimum withdrawals or be subject to a 50 percent tax penalty for the amount that should have been withdrawn. The government wants to make sure you pay your taxes on the tax-deferred benefits you have saved. The Roth IRA has its advantages here in that no minimum distribution is required.
A free credit review at retirement is a plus to put in your back pocket
Obviously, when retiring you will need to be on a defined budget and your living expenses may need to be adjusted to reflect that budget. Naturally, from time to time expenses outside this budget can occur that may require a payment plan of some sort or perhaps a new investment. In this regard, a good credit report is imperative in securing a lower interest rate or even an interest-free loan. A poor credit score can decrease your opportunity to receive an affordable loan and will also force you to pay a higher interest rate on your credit purchases.
Ovation credit experts can help you achieve your maximum credit score even if you have had credit issues in the past. Credit repair is vital to a successful retirement and starting early is your best means of protecting your future. Our guaranteed customized service will help restore your peace of mind as well as your credit rating and will ensure your retirement years will be the best time of your life. Give us a call today to learn more about how we can help you.