By Matthew Gaude & Shawn McGuire
There are many milestones in life and turning 59½ is one to be celebrated. First off, it’s great that you’re healthy and can enjoy the fruits of your labor. Secondly, it marks a time where you can take advantage of your retirement accounts without incurring a penalty.
At this age, you can start to withdraw from your employer-sponsored plans, such as a 401(k) and 403(b), and your IRA accounts, without needing to pay the 10% early withdrawal penalty. However, that doesn’t mean you should count on this money as part of your regular income just yet.
Here are some things to consider when you turn 59 ½.
Consider Using Your Investment Accounts As A Safety Net
If you’re not thinking about retiring just yet, consider putting more money into your retirement accounts. You might as well let your money earn some interest since savings accounts can only earn you so much. In the event of unemployment, you can dip into these accounts without worrying about paying any penalties.
Of course, investments aren’t totally liquid, so don’t put everything you’ve got in there. But if given the opportunity to add more (the IRS allows those over 55 to add extra money in retirement accounts), consider doing so.
Another viable option to potentially improve your investment options is to look into a 401(k) in-service rollover. Many workplace retirement plans only offer limited investment choices, and some of those choices aren’t the most favorable options for your money. An in-service rollover allows you to move a portion of the funds in your current 401(k) into an IRA and gives you greater flexibility, more choices, and more control. If you are 59½, you won’t incur the 10% early distribution penalty and you can take advantage of this little-known feature even if you are still working for your employer and contributing to the 401(k).
Create A Retirement Budget
Creating a budget is a good practice no matter what age you are, but it’s especially important as you draw closer to retirement. Mapping out your expenses and income will help you create a few scenarios to determine if you can retire early and what your income will look like at different points in your retirement. Remember, your social security benefits don’t kick in until you’re 62. That means if you decide you want to retire before then, you’ll want to create a budget that doesn’t take Social Security income into consideration.
As for the types of budgets you want to make, consider creating a bare-bones budget (e.g. what you absolutely need to get by on), and one where you incorporate things you want to do. For example, you can cut out high transportation costs since you won’t need to work, but you can add that back so you can fund your dream vacation.
Playing around with the numbers helps you to see how much you’re projected to spend as well as gives you an indicator as to how much you may still need to save until you actually retire. This would be a good time to see where you can currently cut back on your budget to increase your savings for retirement down the road.
Take Care Of Your Health
If you retire before you turn 65, you’ll need to think long and hard about health care. That’s because Medicare doesn’t kick in until you’re 65. This would be a great time to think about dipping into your HSA for qualified medical expenses (if you have one) or researching healthcare premiums so you’re covered until Medicare kicks in.
If you’re feeling overwhelmed at planning for retirement or figuring out how to manage your finances at this stage in your life, it’s useful to work with a professional who has worked with those in a similar situation as yours. Feel free to contact us today to learn about the specifics of the types of decisions you need to make when you turn 59 ½. Email us at firstname.lastname@example.org or call 770-552-5968. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
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.