Posted in Triplett & Carothers on October 6, 2023
Your 65th birthday is a landmark date for many, as you plan for your senior years. There’s a lot to think about, and your decisions will be based on your income and savings and on your long-term goals. Below is a summary of the major issues.
Sign up for Medicare
If you enrolled in Social Security early, you’ll automatically be enrolled in Medicare at age 65. If you haven’t signed up for Social Security — and there may be reasons to wait — you’ll need to enroll in Medicare because you won’t be automatically enrolled. Basically, you have a seven-month window to sign up for Medicare — the three months before your 65th birthday month, your birthday month and the three months after that.
Sign up for Medicare Part A if you’re working and have health insurance from your employer or your spouse’s employer. Part A covers hospitalization and is free for most people. Medicare Part B covers doctor and outpatient services, and there will be a cost and an annual deductible. Be sure to sign up within eight months after you leave your job and lose your employer’s coverage or you could have a late enrollment penalty of 10% of Part B for every 12 months you should have been enrolled in Medicare but weren’t.
Take full advantage of your HSA
A health savings account can provide a triple tax break:
- Your contributions are tax deductible or pretax through your employer.
- The money grows tax deferred.
- You can withdraw it tax free for eligible medical expenses at any time, and when you turn 65, you can withdraw the money tax free for even more expenses.
You have to stop making HSA contributions when you enroll in Medicare Part A or Part B, but if you’re still working for a large employer, you can delay signing up for Medicare and contribute to an HSA. Even after you stop making new HSA contributions, you can keep the money growing in the account for future expenses. Indeed, many advisers view an HSA as a de facto second 401(k).
Other tax breaks
Single filers and heads of households who are 65 or older qualify for a larger standard deduction. Low-income people also may qualify for the Tax Credit for the Elderly or Disabled. Also check for extra state or local tax breaks. For example, some jurisdictions freeze property tax assessments when you’re age 65 or older. Others may subtract a fixed dollar amount from your home’s assessed value or property tax bill.
Still working? Even if it’s just part time or freelance, you can continue to save for retirement by contributing to a Roth or traditional individual retirement account. Your contributions may make you eligible for a retirement saver’s tax credit — the lower your income, the larger the credit.
Now is the time to create a budget. A good rule of thumb is to expect to spend somewhere between 55% and 80% of your preretirement income. But as with all aspects of estate and retirement planning, work closely with qualified professionals to see what’s right for you.