Register for Client Education Seminar. Learn More »

Financial Planning Milestones and Checklist

by AOG Wealth Management

During various stages of our lives, there are key ages/milestones to keep in mind for financial-planning purposes.  We have put together the time table below to track several of these life-events that we plan for and incorporate into each of our clients’ financial plans:

Age 18 – Legal age of an adult.  Ownership of a Unified Gift/Transfer to Minor Account (UGMA/UTMAs) can be transferred to the individual previously listed as the minor on the account.  They are now able to fully control the account and make all financial-related decisions regarding the funds.

Age 26 – Independent Medical Insurance. Individuals under the age of 26 are eligible to remain on their parents’ health insurance plan.  Prior to reaching your 26th birthday, you’ll need to have a new plan in place to ensure continued coverage.

Age 50 – Catch-up provision for 401ks and IRAs begin.  Instead of the previous annual contribution limit of $18,000 per year for 401ks or $5,500 for IRAs, you can now increase the amount to $24,000 and $6,500 respectively.  This is a great way to “catch up” on making additional contributions to your retirement accounts before reaching your target retirement age.

Age 59 ½ – Access to IRA funds become available.  Prior to age 59 ½, if you were to pull funds out of an IRA for reasons other than a first-time home purchase, qualified medical expenses, or education expenses, you would likely have incurred a 10% early withdrawal penalty.  You will still be required to pay taxes on withdrawals from traditional IRA funds, but no penalties will be incurred.

Age 62-70 – Availability of Social Security Benefits.  Depending on your date of birth, you’ll be eligible to start drawing on your social security benefits between ages 62-70.  There are a lot of factors to consider when choosing your social security start date, such as life expectancy and current employment status. Your AOG advisor can help map out a solution that best meets your goals and needs.

Age 65 – Medicare Insurance Becomes Available.  Upon reaching age 65, most individuals are automatically enrolled in Medicare Part A if they have worked at least 10 years under employment where Medicare taxes were being paid.  Medicare Part B and Part D are available for additional premiums as well.

Age 70 ½ – Required Minimum Distributions (RMDs) begin.  If you have a traditional IRA, you are required to begin drawing annually from these accounts after age 70 ½. You’ll need to withdraw the funds from your account each year by December 31st, but you have until April 1st of the year after reaching age 70 ½ to take your first withdrawal.  RMDs don’t apply to ROTH IRAs, so no need to begin pulling money from those if you hadn’t already planned to!  As clients of AOG, we track and monitor the RMDs for all of our clients that have reached age 70 ½.

Prior to reaching many of these key ages, there are several financial-planning checklist items that we also find helpful to consider:

  •  Emergency Fund – Calculate your monthly living expenses, then work towards building an emergency fund of 3-6 months’ worth of those expenses.  If large, unexpected expenses arise, or if you are unable to work for a period of time, an emergency fund can help provide peace of mind and avoid going into unwanted debt.
  • Estate Planning Documents – A Will or Revocable Living Trust are incredibly important documents that will help to ensure that your assets are handled according to your wishes after your death.  Power of Attorney for Healthcare and Assets, as well as a nomination of Guardian for minor children are also powerful tools that should be considered.
  • Pay off bad debt – While a mortgage on a personal residence is considered “good” or “healthy” debt, high-interest debt such as credit cards, student loans, other personal loans can be hindrances to long-term financial health.  It is usually good to target these loans as a top priority to pay off, especially loans with interest rates of 8-15+%.
  • Contribute to 401k or IRA – Many of us have 401ks available through our employers, some of which offer a generous matching program.  Contributing on a pre-tax basis to a traditional 401k or IRA can be a great way to reduce your taxable income while setting aside funds systematically for retirement.  A ROTH 401k or IRA is a powerful tool to save for retirement, while growing your funds tax-free.
  •   Clear Financial Plan – Financial plans are constantly evolving as life unfolds.However, the initial process of putting together a financial plan can be a way to reduce the stress or concern of the unknowns and provide financial goals and milestones as we make decisions through life.   Our team at AOG is honored to walk through this process with each of our clients and offer guidance on life’s financial decisions, both big and small.

The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.

Category: Financial Planning, Helpful Tips