Below are important age-related tax and financial planning milestones that you should keep in mind for you and your family:
Ages 0-23: Kiddie Tax rules potentially apply to children’s investment income. A child’s investment income below the $1,900 threshold is taxed at favorable rates. However, excess income may be taxed at parent’s income tax rate.
Ages 18 or 21: A minor’s custodial account is in the child’s control when age of majority as set by state law. Steps may be taken to ensure the money is used as intended.
Age 30: Liquidate Coverdell Education Savings Account (CESA) within 30 days of the child turning 30 years old. Earnings not used for higher education costs are subject to taxes and penalties. Consider rolling over to another family member.
Age 50+: Can make additional catch-up contribution to a 401(k) plan of up to $5,500 for 2011, assuming plan permits. Can make up to $1,000 catch-up contribution to traditional or Roth IRA.
Age 55: Avoid 10% premature withdrawal penalty tax when receiving distributions from former employer’s qualified retirement plan after permanently leaving the job.
Age 59 ½ : Receive distributions from retirement plans and accounts without premature withdrawal penalty.
Age 62: Eligible to receive lower, early Social Security retirement benefits. Benefits reduced if income from working exceeds $14,160 in 2011.
Age 66: Eligible to receive full SS retirement benefits if born in 1943-1954.
Age 70: Receive higher, postponed SS retirement benefits
Age 70 ½: Begin taking annual Required Minimum Distributions (RMDs) from retirement accounts and pay resulting income taxes. Roth IRAs may be exempt from RMD rules.
Please contact us to review your situation and minimize your income tax exposure