Celebrate These Financial Milestones in 2022

Maura Schauss |

By The CFP® Team at Washington Wealth Advisors

As the holiday season has wrapped up, many of us are looking forward to a new year. And with a new year comes another birthday! It may be tempting to write it off how old you are if you’re middle aged, but there are financial milestones tied to your birthday that can be reason enough to celebrate.

If you turn 50, 55, 59-1/2, 65 or 72 in 2022, take note of the following financial actions to keep your plan on track.

Age 50 – Catch Up Contributions to 401k and IRAs

You’ve got life experience and valuable wisdom under your belt, and now you can add catch-up contributions to the list!

At 50, you can start contributing an additional $6,500 per year to your 401(k) and an extra $1,000 to your traditional or Roth IRAs.[1] With these increased contributions, you can boost your retirement savings while taking advantage of tax-deferred growth.

Age 55 – Catch Up Contributions to HSA

If you have a health savings account (HSA), then age 55 is an important birthday for you! Up until now, you’ve only been able to make catch-up contributions to your 401(k) and IRAs. But at 55, you can start contributing an additional $1,000 to your HSA as well.[2] This is yet another way to enhance your savings and minimize taxes.

Age 59½ - Withdrawal Penalty Savings

Who said half birthdays couldn’t be on the list? This unique financial milestone between birthdays allows you to withdraw money from your tax-advantaged retirement accounts without the typical 10% penalty.

Note: Just because you can withdraw funds doesn’t mean you should, but this milestone can be a great planning tool if you need the money sooner rather than later.

Age 65 – Medicare Eligibility

With age 65 comes many important decisions regarding your health, including enrolling in Medicare. The window for enrollment technically starts three months before your 65th birthday, so be sure to mark your calendars. If you miss the Initial Enrollment Period, you may face fines or penalties.[3] There are many rules to consider when enrolling for Medicare, especially if you plan to keep working and will have health insurance through your employer. To learn more about Medicare enrollment, click here.

Age 72 – Required Minimum Distributions (RMD)

If you thought there couldn’t possibly be any more significant birthdays after age 65, think again! Age 72 is actually quite important as it’s when required minimum distributions (RMDs) kick in.

Regardless of whether or not you need it, you must start withdrawing funds from tax-deferred retirement accounts at age 72. This includes 401(k)s and traditional IRAs.

Failure to withdraw funds or failure to withdraw the proper amount will result in a 50% penalty tax,[4] so be sure to review your RMDs if you will be turning 72 in 2022.

Do You Have a Financial Milestone Coming Up?

Whether you have an important financial birthday in 2022 or not, planning ahead is always wise. At Washington Wealth Advisors, we can help you navigate your finances at any stage, whether it’s portfolio design, investment management, or retirement planning. To learn more about these important milestones and how we can help, call our office at 703.584.2700, email clientservices@washingtonwealthadv.com or click here to schedule time with us.

 

IMPORTANT WASHINGTON WEALTH ADVISORS DISCLOSURE INFORMATION.  

ABOUT WASHINGTON WEALTH ADVISORS

Washington Wealth Advisors is a fee-only registered investment advisory firm serving busy families, executives, women building wealth, and small business owners. We provide Wealth Advisory Services—financial planning coupled with asset management—guided by a personalized investment strategy based on each client’s unique goals. Our unbiased advice, independent approach, and proactive investment management help to support our clients’ overall financial peace of mind.

 

[1] https://www.cnbc.com/select/401k-ira-contribution-limits-2022/

[2]https://www.kiplinger.com/personal-finance/insurance/health-insurance/health-savings-accounts/601415/hsa-limits-and-minimums

[3] https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start

[4] https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions