You may wait until 70 to retire, or you may simply be planning ahead so you know what to expect. Either way, there are many money matters that change on or around your 70th birthday. Some things stop, some thing start, and some options become more attractive as you age.
Social Security Benefits Stop Accumulating at 70
Up until age 70 your Social Security benefits accumulate delayed retirement credits. There is no benefit to waiting until past 70 to start collecting your benefits, but for many people, married couples in particular, there can be a great benefit to having the highest earning spouse delay the start of their Social Security benefits until age 70. This higher benefit amount will then continue in the form of a survivor benefit for the longest spouse to live and can provide a powerful type of life insurance in the form of inflation adjusted life-long income.
Learn more: Social Security Survivor Benefits for a Spouse
Required Minimum Distributions Start at age 70 ½.
By April 1st of the year after you reach age 70 ½ the IRS requires that you start taking withdrawals from your qualified retirement accounts like IRAs or 401k plans. Although many people wait until they are required to take these distributions this does not always make sense. If you had lower income years prior to reaching age 70 it could make sense to withdraw money from retirement accounts and pay little to no tax. You have to run a tax projection each year to determine what might be best. Regardless, at 70 you will have to start taking withdrawals even if you are still working.
Some Options Become More Attractive at 70 and Beyond
The longer you live the longer you are expected to live. If you have good genes and a healthy lifestyle, then you may want to consider guaranteed income choices that provide income for life. Some of these choices, such as immediate annuities and reverse mortgages, become more attractive at age 70 and beyond.
Immediate Annuities at 70
Retirement income sources like immediate annuities enable you to take advantage of something called a mortality credit. If you may be long lived this type of product becomes a more attractive option around age 70, and can ensure that you will not outlive your income.
Reverse Mortgages at 70
Reverse mortgages become worthy of consideration at age 70 and beyond also. A reverse mortgage can allow you to use the equity in your home for income while remaining in your home for as long as want. Reverse mortgage can be an option that provides you with guaranteed income and no risk. (Contrary to popular belief, the bank cannot take your house with a reverse mortgage.)
Investments at 70
If you are going to retire at 70 and need retirement income from your savings and investments you will need to learn what investments can generate the amount of income you need.
One option is to use safe investments, which may pay a low amount of income, but your principal will be guaranteed.
- Read Making Safe Investments to learn more.
Another option is to build a portfolio of investments following a prescribed set of withdrawal rate rules.
- Withdrawal Rate Strategies for Creating Income from a Portfolio gives you a good overview of how this works.
You may want to seek out the services of a qualified retirement planner to help you figure out what is best for you.
- Find out what to look for in What Will a Good Retirement Planner Do for Me.
Other Documents Needed at 70
Age 70 is also a good time to make sure you have a medical emergency plan in place, as well as review your beneficiary designations and other important documents like a will or trust. The resources below can help you get started.