Tax Tip of the Week | No. 354 | Financial Perks of Growing Older

Tax Tip of the Week | May 11, 2016 | No. 354 | Financial Perks of Growing Older

As we get older we must adjust for wrinkles, gray hair, vision and hearing loss and general aches and pains. There are, however, some financial benefits to ageing! Here are a few examples:1.    Bigger retirement account limits.  When you turn 50, you can begin increasing your 401(K) and/or IRA contributions.  The maximum amount you can contribute to your 401(K) is now $24,000/yr. vs. $18,000/yr. for those under age 50.  An additional $1,000 can be contributed to your Traditional or Roth IRAs for a maximum of $6,000/yr.2.    No more early withdrawal penalty.  Once you turn age 59.5 there is no more 10% penalty to withdraw from your IRA.  If you leave your job at age 55 or older, you can begin taking distributions from your work-place retirement account without the 10% penalty.3.    Social Security payments.  You can sign up for early, reduced, benefits as early as age 62.  Depending on the year you were born, you can receive full benefits at age 66 or 67.  If you can hold off until age 70 to sign up for Social Security, your monthly benefits will go up even more.  The best part of Social Security is benefits are adjusted for inflation every year and payments continue for as long as you live.4.    Reduced taxation.  The amount of your Social Security benefit that is included in your taxable income depends on the amount of your other sources of income.  It could be as low as 0%, 50% or at most 85%.  Ohio doesn’t tax Social Security benefits at all!5.    Affordable health insurance.  Once you turn 65, you don’t need to worry about having a job that offers a health plan.  You can sign up for Medicare at 65.  For most, the monthly cost of Medicare is $104.90 in 2016 for basic coverage.6.    Tax deductions for seniors.  If you are over age 65, your standard deduction is $7,850 individual/$15,100 married vs. $6,300 individual/$12,600 married in 2016.7.    Relaxes filing requirements.  Many people over 65 no longer need to file a tax return. An individual with income up to $11,850 or a couple with income up to $23,100 would not need to file.  Note:  at these income levels, none of the Social Security benefits would be included in taxable income.8.    Senior Discounts.  If you are willing to admit your age, many retailers and restaurants offer special discounts.  Plus, you get to use your “Golden Buckeye” card.  (The discount I like the best is reduced green fees at most public golf courses!)Give us a call if you are approaching any of these ages we discussed.  Let us help you update your tax planning as you mature.Rick Prewitt (the guy who just turned 60) – the guy behind TTW...until next week.