If you’re planning for retirement and wondering if you have made the right decisions to ensure your future financial security, you are not alone. Many investors express the same doubt. You want to make informed decisions regarding your investment accounts, and you need to know what strategies will maximize your growth potential, whether you are a young investor or if you began investing later in life.
The age at which you begin to withdraw funds determines how much tax you will pay and what penalties you may incur if you withdraw early. Regulations and laws change over time, as do the economic situations that may influence any decision to withdraw from your investment funds. But regardless of your age or situation, Ambassador Advisors can help you sort through a variety of solutions to satisfy your investment needs.
Let’s look at some specific age ranges where you will need to make informed decisions regarding your retirement investments.
Investors age forty-nine and younger
Those who have been able to invest early in life benefit from greater compounding investment returns that accrue over time. Often those who do start investing at a younger age have an above-average income and enjoy employee-employer contribution plans with a matching fund. Take advantage of all matching funds that if you can, so that you don’t leave any money on the table.
Younger investors also benefit particularly well from Roth accounts that enable them to pay taxes at a current rate at the time of the contribution, with the expectation that salary and tax brackets will increase with age.
Investors between fifty and sixty years old
If you began investing later in life, there are also different strategies to pay attention to. Those who are fifty years of age and may not have contributed as much as they would have liked in their younger years can play catch-up with an increased cap and higher IRA contributions.
Your age can turn a potentially difficult situation into a positive one. If you need to leave your place of employment in the year you turn 55 or later, you are allowed to withdrawal from a 401(k) account from that job without any penalty. More good news awaits you as you pass through your fifties. The ten percent penalty on all early IRA withdrawals comes to an end when you are fifty-nine and a half years of age. However, the income tax will still need to be paid at the time of the withdrawal.
Investors between sixty and seventy years old
Those who reside in this decade of life are in the sweet spot regarding retirement fund withdrawal options. Here are some facts that may surprise you. Did you know that you can begin collecting from your Social Security contributions when you are sixty-two years of age? Yes, this option is available, but be aware that you will only collect seventy percent of the benefits you would collect if you wait until you are sixty-seven.
If you were born after 1960, you would need to wait until you reach age sixty-seven to collect your full benefit amount. And it is important to enroll for Medicare when you are of age; otherwise, your Part B premiums will be raised ten percent as a penalty for each year you were eligible for Medicare but didn’t enroll.
Baby Boomers born between 1943 and 1957 have several different rules that will dictate how and when they retire, but their full benefit retirement age is sixty-six. It may seem like the more answers you get regarding retirement income, Social Security, and all the retirement income rules and regulations, the more questions you need to have answered. This is why hiring a professional is worth its weight in gold – literally – when it comes to figuring out the when’s and why’s of retirement decisions.
But how do my retirement fund investments fit into this complex picture?
There is good news for you at the end of this brief look at how age can affect how you manage your investments. If you don’t have income from a job or a business, your Social Security benefits won’t be affected at all. Regardless, using a professional advisor throughout the life of your retirement investments can help prevent errors that may have a negative effect and can help capture opportunities that will help your investment growth potential.
Investors should be aware of the changes in laws and regulations and how those changes affect the funds in which they have invested, particularly when it comes to the choice of when to retire. Contact us now, and we will help you straighten the winding road that leads to retirement and give you confidence that the choices you make are right for you.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.