It may be hard to believe that you're turning 70, but if that's the age you'll be reaching this year, it's something to celebrate. That said, turning 70 means you'll have some financial matters to address, so here's what you need to know.
1. It's time to sign up for Social Security
You're entitled to collect your full monthly Social Security benefit, based on your personal earnings history, once you reach full retirement age, or FRA. FRA falls between 66 and 67, depending on year of birth. However, the Social Security Administration (SSA) rewards seniors who delay their filings past FRA. For each year you do, your benefits get boosted by 8%, and that increase then remains in effect for the rest of your life.
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There's just one catch -- once you turn 70, your Social Security benefits can no longer grow, which means there's no sense in delaying your filing beyond that point. As such, if you haven't yet claimed Social Security, be sure to sign up as soon as you turn 70.
Now if you forget to file for benefits at 70 on the nose, worry not. The SSA will pay you up to six months of retroactive benefits, so you won't necessarily lose out on money. But if you wait too long beyond your 70th birthday, you could miss out on several months of benefits, so don't let that happen. Instead, mark your calendar and sign up for Social Security as close to your 70th birthday as possible.
2. You don't need to take required minimum distributions just yet
Savings in a tax-advantaged retirement plan like a traditional IRA or any type of 401(k) are subject to required minimum distributions, or RMDs. RMDs are calculated each year based on your account balance and life expectancy, and the penalties for not taking them are steep -- 50% of the amount you fail to withdraw.
It used to be the case that RMDs first kicked in at age 70 1/2, but thanks to the recently passed SECURE Act, RMDs now don't begin until age 72. As such, you won't need to worry about them just yet -- though it never hurts to plan for them. One thing you should know is that Roth IRAs are the only tax-advantaged retirement plan to not impose RMDs, so it could pay to convert a traditional IRA, or part of one, to a Roth before you retire.
3. It could pay to keep working
Life expectancies are on the rise, and while that's certainly a good thing in theory, it could increase your risk of depleting your IRA or 401(k) in your lifetime. That's why it may make sense to keep working -- even once you turn 70 and begin collecting Social Security.
The good news is that once you reach FRA, you're allowed to receive benefits and work simultaneously without it impacting your monthly payments. And if you continue working, even if on a part-time basis, you'll have an opportunity to pad your IRA or 401(k), all the while leaving your existing savings untouched.
Continuing to work could also benefit you physically and mentally. Many seniors don't move around as much once they stop working, which is a negative thing for your health. And many feel isolated and lonely when they stop reporting to a job. If you enjoy what you do and have the capacity to keep at it, it pays to push yourself to stay put as long as possible.
Your 70th birthday is a big one. Keep these important points in mind as you navigate what will hopefully be a rewarding, fulfilling year.
