Part 2 of 3: Ages 66 to 75
In Part 1, we looked at ages 60 to 65. This season, from 66 to 75, brings two big money decisions: when to claim Social Security, and what happens when the government wants its cut.
Claiming Social Security
Your full retirement age is when you’re entitled to 100 percent of your benefit. If you were born in 1960 or later, that age is 67.
- Claim at 62, the earliest start, and you generally have a permanent 30 percent reduction in benefits.
- Claim at full retirement age: Receive 100 percent of your benefit.
- Wait until age 70: Delayed retirement credits add 8 percent for each year you wait after full retirement age, up to age 70. After 70, those credits stop, so waiting longer will not raise your benefit further. Cost-of-living adjustments can still increase your benefit from year to year.
Waiting has pros and cons. Less income now, or more later. If you delay, it takes years of the higher monthly payments to make up for the months you waited. Whether that trade-off works in your favor depends on how long you live and on your other sources of income. There is no one answer that fits everyone.
Your individual needs will affect the decision:
- Do you need the money now?
- Do you have other assets to live on while you wait?
- What is your health like, and what does your family history suggest?
- Are you married? If you are the higher earner, when you claim can also affect the survivor benefit your spouse may receive.
Required Minimum Distributions
Uncle Sam wants his cut. If you’ve been saving in traditional IRAs and 401(k)s, you generally received a tax break when the money went in. When it comes out, it usually counts as taxable income.
You generally must start taking required minimum distributions, or RMDs, from those accounts at a certain age. Under current IRS rules, that age is 73 if you were born from 1951 through 1958, and 75 if you were born in 1960 or later. Traditional IRA owners must begin at that age even if they are still working. If you are still working and have a workplace plan, you may be able to delay RMDs from that plan until you retire, unless you own 5 percent or more of the business that sponsors the plan.
Roth IRA owners do not have to take RMDs during their lifetime.
Because these withdrawals can raise your taxable income, some careful planning beforehand may help you manage the tax impact. Your situation will determine what makes sense.
What’s Next
In Part 3, we’ll look at ages 76 and beyond: making your income last and planning for care.
The goal isn’t to solve every retirement question at once. It’s to see the big picture, then work through one season at a time.
For general educational purposes only. Your benefit eligibility, tax treatment, and planning needs will depend on your circumstances.