65 is the traditional age at which people in the U.S. start to think seriously about retirement. It’s also an important milestone because of the financial implications it has in a variety of different contexts.
It’s essential to understand all the ramifications that turning 65 has on your financial life. Regardless of whether you’ve already retired, are looking to retire on your 65th birthday, or expect to keep working for the foreseeable future, you’ll benefit from knowing key facts about vital programs. With that in mind, here’s a closer look at what those who are turning 65 in 2019 should know.
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Welcome to Medicare
The most important thing about turning 65 is that you become eligible for Medicare. Unless a specific health condition applies in your case, reaching 65 is the first opportunity that most people have to gain eligibility for the healthcare program.
One thing to keep in mind is that unless you’re already getting Social Security, signing up for Medicare doesn’t happen automatically. You’ll have to take specific action to sign up. But you don’t have to wait until your 65th birthday, as Medicare lets you sign up in advance as much as three months before you become eligible. Do so, and you’ll ensure that your coverage starts right away rather than facing a delay.
That said, you might not need Medicare when you turn 65. If you’re still working or if you get healthcare coverage because of your spouse’s employment, then enrolling in Medicare isn’t always mandatory. In that event, you’ll want to pay close attention when that outside coverage ends, because that’ll trigger a special Medicare enrollment period that you’ll need to take advantage of to get your benefits started in a timely manner. Meanwhile, even some of those who are still working must nevertheless sign up for Medicare right away, so check with your HR professionals at work to find out what you need to know.
The IRS has some tax breaks for you
There are a few different tax benefits that turning 65 gives you. Those who take the standard deduction on their 2018 tax returns will get an additional boost if they turned 65 by the end of 2018, with single filers getting an extra $1,600 and joint filers getting either $1,300 or $2,600 depending on whether one or both spouses is 65 or older.
Those who are 65 can also qualify under certain circumstances for the Credit for the Elderly. This offers a tax credit of between $3,750 and $7,500 to those who meet its income limits. To qualify, not only does your overall adjusted gross income have to be below the upper limit, but you also have to demonstrate that you don’t get too much income from other sources like Social Security or nontaxable pensions, as the chart indicates below.
Adjusted Gross Income Must Be Less Than:
AND Nontaxable Social Security, Pension, Annuity, or Disability Income Must Be Less Than:
Single, Head of Household, or Qualifying Widow(er) with Dependent Child
Married Filing Jointly With One Spouse 65 or Older
Married Filing Jointly With Both Spouses 65 or Older
Married Filing Separately and Lived Apart From Spouse Throughout the Year
Data source: IRS.
Why 65 isn’t as important for Social Security as it used to be
When Social Security first started decades ago, 65 was the full retirement age. However, that’s no longer the case. If you’re turning 65 in 2019, then your full retirement age is 66.
That doesn’t mean that you can’t claim Social Security benefits. But if you do, you won’t get your full retirement amount. Instead, they’ll be reduced by five-ninths of a percent for every month before your 66th birthday that you claim them. For instance, if you claim on your 65th birthday, your benefit will take a hit of 6.67%.
It also means that claiming Social Security while continuing to work could lead to benefit forfeiture. In 2019, if your earnings are more than $17,640 in 2019, then you’ll lose $1 of annual benefits for every $2 you earn above that amount. However, if you retire during the year, then you’re entitled to your regular Social Security check for any month after you retire, regardless of how much you earned prior to your retirement.
Turning 65 is important, not just for your personal life but also for your finances. By knowing the consequences of turning 65, you’ll be able to be smarter with your money for the rest of your life.
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