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Age-based guidelines for retirement income planning

Apr 15, 2024 | RBC Wealth Management


Wisdom compares life to a journey – it’s also apt for retirement. Retirement is more like a decades-long odyssey around the world than a summer spent learning to sail. Careful planning tantamount to living comfortably and not running out of money.

Man and boy playing with sailboat in pond

To plan for your retirement — whether it’s years down the road or only a few months away — consult your financial advisor. The RBC Wealth Management research-based RBC Retirement Paycheck: A guide to creating your personalized retirement paycheck is also available to help people of all ages plan for and thrive in every stage of life — leading up to and including retirement.

These age-based retirement income planning tips may also help you achieve the financially secure future you want.

Age 50+: Seize opportunities

Starting at age 50 you can contribute more to your retirement accounts to help boost your retirement savings. In 2024, the catch-up contribution limits are $1,000 for individual retirement accounts and $7,500 for qualified employer-sponsored retirement plans.

Age 55: Think strategically

Look at your retirement health care choices and what they may cost, including long-term care. If there’s a gap between your projected essential expenses (housing, food, health care) and your assured lifetime income sources (Social Security, pension, annuity income), develop a strategy to help cover it. Consider the advantages of a Health Savings Account (HSA) if available to you through your employer.

The Separation from Service After Age 55 option under Internal Revenue Service Code 72(t) may allow you to make a penalty-free withdrawal from your qualified plan (ordinary income taxes still apply).

Age 59 1/2: Act tactically

Shift your focus from growing to preserving wealth and planning how to use it to create income. Your asset allocation decisions and the tax status of the accounts you use to hold assets will become important in the coming years to help manage taxes.

The federal tax code allows penalty-free distributions from your IRA or qualified plan any time after age 59 1/2. You will need to pay ordinary income taxes on any withdrawals. Before taking money out, consider the advantages and disadvantages.

Age 62: Begin transitions

Before leaving the work force, consider taking a retirement test drive by living for a month on your projected retirement income.

The Social Security Administration allows qualified individuals to start claiming early Social Security benefits beginning at age 62. However, the amount of each payment will be permanently reduced, compared with the amount received if payments begin at full retirement age. Employment income received prior to full retirement age may reduce benefits further.

Age 65: Enroll in Medicare

Sign up for Medicare benefits during the three months leading up to your 65th birthday. There are many options based on your health care needs and financial situation.

Ages 66 - 67: Take full benefits

Congratulations! Depending on what year you were born, you reach your full retirement age and qualify for your full Social Security benefit.

Age 68 - 70: Take delayed benefits

If you defer taking your Social Security benefits until after your full retirement age, the base amount you earn each month will increase eight percent for each year you delay, with the maximum benefit reached at age 70. These are also years when you can reposition assets to a Roth IRA or Stretch IRA prior to taking required minimum distributions (RMDs).

After age 73: Manage taxes

Annual RMDs from your qualified retirement accounts (those featuring tax deferral) are required no later than the year you turn 73. Your RMDs will affect your taxable income and are taxed at your ordinary income tax rate.

Producing a dependable income throughout retirement may be one of the most rewarding wealth management adventures you undertake.

Not yet 50? Plan your retirement paycheck

Just because your retirement may be far off into the future doesn’t mean it’s not on your mind. People are living longer — which sounds great, right? — but living longer costs more.

Having more years outside the workforce than previous generations, paired with rising health care costs, might have you wondering how much you’ll need for your retirement.

To help prepare for a secure financial future:

  1. Fund an emergency savings account (three months of expenses)
  2. Max out your personal or employer-sponsored retirement plan
  3. Take advantage of a Health Savings Account (HSA)
  4. Stay invested throughout the market’s ups and downs
  5. Consider higher risk/higher return investments for your longer term financial goals.

You don’t have to plan alone. A financial advisor can assist you today and throughout your journey.

Read more in the Q2 2024 edition of the Investor’s Edge >


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