Financial Birthdays

Financial Birthdays for Older Americans to Remember

The older we get, the less we like to think about, let alone celebrate birthdays.However, there are several important financial birthdays older Americans shouldn't overlook.

  • Age 50. The earliest age at which a surviving spouse can collect a survivors retirement benefits from Social Security,  but only if you are disabled (see “Age 60”).

  • Age 55. Two important financial issues occur at this age. First, beginning at age 55 or older you can take the one-time $500,000 capital-gains tax exclusion on the sale of your home for married couples or $250,000 for singles. The capital-gains tax is assessed against the profit you make when you sell your home (the selling price minus what you paid for the house and the cost of any improvements you made).  Normally, people postpone the tax by buying a house of equal or greater value. But older people may want to buy a smaller, less expensive home or move into an apartment. Thus, their gain could be taxed. The one-time exclusion allows you to avoid paying taxes on up to $500,000 in gain (you must have lived in the house two out of the last five years).

  • Also at age 55, you can begin making withdrawals from a company-sponsored retirement plan (but not an individual retirement account) without an early withdrawal penalty (see “˜Age 59 1/2”). However, you must leave the employer (retire, be terminated, change jobs) in order to take advantage of this early withdrawal exception.

  • Age 59 1/2. This is the age at which you can begin making withdrawals from any retirement plan or IRA without the ten percent early withdrawal penalty (assessed against any money you pull out of the account and don't roll over into another retirement account or IRA). The withdrawn money, however still faces income taxes.

  • Age 60. The earliest age at which the surviving spouse can collect survivor's benefits from Social Security (unless disabled). However, if you start collecting at age 60, benefits will be only 71 1/2 percent of the full benefits the deceased would have been entitled to at the full retirement age (see “˜Age 65-67”). If you remarry before age 60, you permanently lose survivor benefits. If you remarry at age 60 or later, you can collect as long as you are not claiming benefits as a current spouse.

  • Age 62. The earliest age at which you can begin collecting your own Social Security benefits or your share (50 percent) of the amount of benefits being received or eligible to be received by a living spouse or former spouse. These benefits will be permanently reduced, up to 20 percent, from what you or your spouse would be entitled to at full retirement.

The minimum age you can get an FHA reversed mortgage. A reverse mortgage is where you receive money from a lender in exchange for a share of some or all of the equity in your home. Most commercial lenders require the 62 minimum age, as well.

  • Age 65. If you turned 65 before last year (2000) you can receive full Social Security benefits. You can begin receiving Medicare on the first day of the month in which you turn 65.

  • Age 65-67. The age at which you can begin to collect full Social Security is gradually being shifted from age 65 to age 67 beginning last year and being completed by the year 2027.

  • Age 65. The age at which earnings above certain limits no longer reduce your Social Security benefits. For 1997 for example, every three dollars of income earned over $13,500 by Social Security recipients ages 65 through 69 reduced their benefits by one dollar.

  • Age 70 1/2. By April 1 of the year following the year you turn 70 1/2, you must start making required minimum withdrawals from your retirement plan or IRA. If you continue working beyond age 70 1/2, you donÌ“t have to make minimum withdrawals from a qualified retirement plan until you actually retire. However, you must begin withdrawals from any IRAs by 70 1/2 or if you own five percent or more of the company.