Liz Weston: A Year-End Money Checklist for People 50 and Over


Age brings unique opportunities and obligations, including some important year-end tasks that can help you get the most out of your money. For those 50 and over, here are a few to consider:


If you still have a job, use a retirement calculator to see if you should increase your savings rate.

Catch-up contributions could allow you to save more in tax-efficient accounts. A person 50 or older can contribute up to $ 26,000 to a 401 (k) workplace in 2021, and up to $ 7,000 to an IRA, says Mark Luscombe, senior analyst for Wolters Kluwer Tax & Accounting .

You have until December 31st to contribute to the work plans for 2021 and until April 15th to make your 2021 IRA contributions. The possibility of contributing to a Roth in 2021 gradually disappears from a modified adjusted gross income of 125 $ 000 for singles and $ 198,000 for married couples filing jointly.

Slightly different rules apply to health savings accounts, which are associated with qualifying, high-deductible health insurance plans, Luscombe explains. The contribution limits for 2021 are $ 3,600 for people with individual coverage and $ 7,200 for people with family coverage. People aged 55 and over can make an additional catch-up contribution of $ 1,000. As with IRAs, you have until the tax filing deadline of April 15 to contribute for the year.

To contribute to an HSA, the account holder must have a qualifying health insurance plan with an annual deductible of at least $ 1,400 for individual coverage and $ 2,800 for family coverage. People on Medicare cannot contribute to an HSA, but they can withdraw money tax-free from an HSA to pay for medical expenses, including Medicare premiums, deductibles, and co-payments. said Luscombe.


Money can’t sit in retirement accounts indefinitely, says Mary Kay Foss, a chartered accountant, member of the American Institute of CPA’s Personal and Self-Employed Tax Committee. Withdrawals must begin at some point, usually at age 72. If you miss a deadline or withdraw too little, you could face a tax penalty equal to 50% of the amount you should have withdrawn but failed to do. Your retirement fund or brokerage firm can help you calculate the appropriate amount, or you can use the tables in IRS publication 590-B.

The IRS specifies the minimum you must take each year based on your account balance as of December 31 of the previous year. Your minimum distribution required for 2021, for example, will be based on your balance as of December 31, 2020.

You should generally receive your distributions before the end of the year, although you can defer your first RMD until April 1 of the year after you turn 72. If you delay, you will need to take your second RMD before the end of this year. , says Foss.

You can carry over RMDs from a work plan such as a 401 (k) if you still work for the company sponsoring the plan and do not own 5% or more of the company.

Additionally, there is no RMD for Roth IRAs during the account holder’s lifetime. A spouse who inherits a Roth IRA may treat it as their own, also avoiding the required distributions, but the other heirs must start emptying the account after his inheritance.


Another way to avoid RMD is to convert an IRA or other retirement account to a Roth, but that means paying taxes on the money now rather than later.

Conversions can make sense when you expect to be in a higher tax bracket in retirement and can pay tax without plundering your retirement savings, says certified financial planner Michael Kitces, editor of the website. Nerd’s Eye View Financial Planning Strategy. Young people are often good candidates for conversions because their tax bracket will likely increase with their income. Most people nearing retirement will face the opposite situation: their tax bracket will go down once they stop working, so conversions may not be a good idea.

People who have been diligent savers, however, could find themselves pushed into a higher tax bracket once they are required to start making minimum withdrawals, Kitces says. In that case, Roth conversions before age 72 might be smart, but you’ll want to consult a tax professional. Excessive conversion could increase your tax bill and, if you are affiliated with Medicare, potentially increase your premiums.


You can also avoid the minimum required distributions through qualified charitable distributions from your IRA, which can begin after you’re 70 and a half, says Foss. The money must be transferred directly from the IRA to a qualified charity. These contributions may be excluded from your income, but count towards your required annual minimum distribution if funds leave your account before the RMD deadline, which is usually December 31st.

Qualified charitable distributions can be made from most types of IRAs: traditional, renewable and legacy, as well as inactive Simplified Employee Pensions known as SEP and SIMPLE, which are employee incentive plans. savings for employees. (Inactive means you no longer contribute to these plans.) The maximum annual amount you can contribute in this way is $ 100,000.

FILE – This undated file photo provided by NerdWallet shows Liz Weston, columnist for the personal finance website. (NerdWallet via AP, file) {Taken from column 7.12.21}

This column was provided to The Associated Press by the NerdWallet personal finance website. Contact Liz Weston, a Certified Financial Planner and Columnist at NerdWallet, at [email protected] or @lizweston.


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