First of all, Happy Half-Birthday! As we get older and enter new chapters in our life, it comes with wisdom. However, once you reach age 59 1/2, it also starts to present new and important financial decisions that can affect your retirement lifestyle. If you’re turning 59 1/2 this year, that means you’ll be eligible to withdraw money from your retirement accounts without penalty. This is one of several birthdays that affect your retirement accounts, but today’s let’s focus on some of the things you need to consider at this important milestone:
It May Be Time to Rethink Your IRA or 401(k)
Your IRA and 401(k) are an important piece of your retirement income plan. Reaching age 59 1/2 doesn’t necessarily mean you’re required to withdraw form these accounts yet, especially if you’re still working. Still, it may be time to consider rolling your 401(k) over into an IRA. 401(k)s generally have more limited investment options than IRAs.1 They can also come with administrative fees, which means a percentage of your assets goes toward the maintenance and growth of your account.2 Rolling your 401(k) over into an IRA can potentially increase your options, reduce your fees and simplify your finances.3 This gives you a little more control of the risk your investments are taking and helps you design your retirement plan to fit your goals and situation.
A Chance to Catch Up and Contribute More to Your Retirement Savings
From age 50, you’re eligible to start “catching up” with your retirement savings, or making extra contributions to your 401(k) and IRA. The contribution limits for 2023 have increased by $1,000, so $7,500.4 The 401(k) contribution limit is $22,500, but the catch-up contributions can be added to that, totalling $30,000 per year. Of course, there are inome limitations as well. Single filers earning between $138,000 and $153,000 are subject to those limits. If you’re married, that limit is applied to those earning $218,000 to $228,000.5
Turning 59 1/2 brings with is questions, decisions, and opportunities. If you’re interested in discussing how you can best implement your 401(k) and/or IRA into your Financial House, the team at Eric Scott Financial are here to help. Call our office at (435)773-9444 to schedule your complimentary visit.
- Investing in Your 401(k) | FINRA.org
- What Should You Do When You Turn 59½? | Kiplinger
- 401(k) Fees: Everything You Need to Know – SmartAsset
- New 2023 IRS Retirement Plan Contribution Limits [Including 401(k) & IRA] | White Coat Investor
- 2023 IRA Deduction Limits – Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work | Internal Revenue Service (irs.gov)
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