Will Hitting “Peak 65” Rewrite the Rules for Retirement?
We spend a lot of time on Keen on Retirement discussing how retirement is changing, from new laws and rules to generational shifts in how seniors work and live. But one constant in the retirement planning process is the importance of the age of 65.
Many folks still feel like turning 65 means you've hit "retirement age," even though the government's definition is a bit different. And even if you continue to work well into your 70s, at age 65 there are some important decisions that should be coordinated as your vision for your Golden Years comes into focus.
On today's show, we discuss why the age of 65 will be an especially important transition point for the next couple of years. We also answer listener questions about charitable contributions and required minimum distributions that might factor into your tax prep this spring.
1. “Why am I seeing so many stories about seniors who are turning 65 this year?”
Because we're entering what some in our industry are calling "Peak 65."
From 2024 to 2027, on average, about 11,000 Americans will turn 65 every day. And by 2030, all baby boomers will be 65 or older.
Now, as we've discussed many times, retiring at 65 was almost automatic for previous generations of seniors. That won't be true for many baby boomers, their kids, and their grandkids. Yes, Medicare eligibility still starts at 65. And if you want to avoid receiving a reduced Social Security benefit, you'll have to wait until you reach "full retirement age," which the government is gradually raising to age 67. And even if you do delay taking Social Security, those checks probably won't be enough to keep most folks financially secure during a 20 or 30-year retirement. Most boomers, Gen Xers, and older millennials who moved around during their careers also won't have corporate pensions to support them.
Many of these Peak 65 articles are sounding an alarm: retirement is coming faster than you realize, and you need to be prepared. All generations need to understand that government and corporate benefits alone probably won't be enough to secure retirement. And while it's never too late to start working with an advisor on a comprehensive financial plan, your timeline starts to narrow the longer you wait.
A final word of caution: I have read some Peak 65 articles that are subtle advertisements for things like annuities, mutual funds, and various alternative investments, which are supposed to help folks "catch up" in their retirement planning. You should consult with your advisor before you buy any financial products. There's room for different kinds of investments in a balanced, diversified portfolio. But any article that says a single tool is all you need to "fix" your retirement is just trying to sell you something.
2. “What date does the IRS consider the official giving date to charities?”
Charitable donations have to be made by December 31st in order to be eligible for a deduction on that year's taxes. So, a donation you made last December (or earlier in the year) will be calculated on your 2023 taxes; a donation you just made in January will be part of your 2024 filing.
As to how specific donations are accounted for, that depends on what kind of donation you made and how the charity processes the donation.
For personal checks, the IRS uses the postmarked date.
Seniors who are over age 70 1/2 can make qualified charitable distributions (QCDs) out of their retirement accounts, but those checks are recorded based on the date they clear. So, if you sent a QCD check at the end of December 2023 but it didn't clear until January 2024, then that QCD counts for 2024. We usually advise folks to mail year-end charitable checks by Thanksgiving so that they're recorded in the intended year, especially QCDs that count towards required minimum distributions (more on that below).
Stock transfers typically happen quickly when moved to a donor-advised fund held at the same custodian, making the process very efficient. We have worked with folks who hold physical stock certificates, and those need to be donated and deposited into charities or a donor-advised fund well before the last week in December to be certain the donation is recorded in the intended tax year.
3. When do I need to start taking required minimum distributions (RMDs) from my retirement accounts?
RMD age has changed twice since 2019, most recently at the end of 2022 when the SECURE Act 2.0 was passed.
For seniors born between 1951 and 1959, RMD age is currently age 73.
If you were born in 1960 or later, RMD age is currently age 75.
How long will these thresholds last?
I'm not making any predictions here. But I suspect that more changes will be coming to RMDs and other retirement rules in the near future. Retirement planning has become increasingly fluid and dynamic, and at Keen Wealth we've designed a comprehensive planning process to keep pace. We're also committed to educational content and events like Matt Wilson's recent webinar on SECURE Act 2.0 so that folks have a better understanding of these changes when they happen.
Are you joining the Peak 65 wave this year or next year? Schedule a meeting at Keen Wealth and let's discuss your questions about prepping for a successful retirement.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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