By waiting until age 70 to take Social Security, clients will receive 132 percent of the primary insurance amount – nearly double the monthly income for the rest of their lives. Those benefits are enhanced by an annual cost-of-living adjustment, which is added in for years of delayed filing.
If a client doesn’t already receive Social Security, they won’t be automatically enrolled in Medicare. It’s important to sign up sometime in the three months before turning 65 up through the three months following, because failing to do so can lead to expensive premium penalties down the road. For example, monthly Part B premiums jump 10 percent for each full 12-month period that a senior could have had coverage but didn’t sign up.
For clients who plan to work past age 70, they can delay starting Medicare without penalty if they’re insured based on active work status by an employer with more than 20 employees.
One plus for working seniors is that Required Minimum Distributions (RMDs) don’t have to be taken from the 401(k) of a current employer. An RMD must be taken from each of any older 401(k)s at former workplaces, and one way to minimize RMD obligations is to roll over those accounts to the current 401(k). Consolidation also brings simplicity.
Converting to a Roth IRA generates an income tax liability in the year of conversion, but removes RMD obligations in future years while your client is living. For that reason, they’re especially useful for people who want to pass on IRA assets to heirs (who will have to take RMDs). In the case of working seniors, however, the attractiveness of Roth conversion depends very much on your client’s individual tax situation in any given year.
Here are the top 5 takeaways from Planning For Non-Retirment, by Mark Miller.
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