The best times to save and take money out of retirement

Preparing for retirement has its sweet spots. You may reach the ideal retirement age while you are still working. You’ve reached a point in your job and financial life where you can afford to put more money away for retirement. However, you have several years of development left (you hope) before you have to start taking money out of your retirement funds.

At this point, you should save as much as you can and rely on market forces to position you favorably in the future. This period might appear between the ages of 45 and 50 when you must take a distribution from your retirement funds (likely between 57 and 65).

However, there is another sweet spot where you can adjust your retirement assets without being constrained by IRS regulations, possibly after you retire. The early withdrawal penalty is waived on all retirement funds once you reach the age of 59 1/2. You are free from the 10% early withdrawal penalty on money taken from your TSP at that time if you leave federal employment in the year you attain age 55 or later (50 for special category workers and even sooner for retired public safety personnel).

You can withdraw money from your Thrift Savings Plan without incurring penalties known as “in-service withdrawals” if you continue to work after those ages and are still employed at age 59 1/2. The early withdrawal penalty for IRAs is waived until age 59 1/2, whether or not you are employed. You will remain in this “golden place” until you turn 73 and have to start taking mandatory minimum distributions.

What can you do in this sweet spot?

Retirement savings can be moved around and redirected without paying additional taxes. You can transfer funds from a standard IRA to a Roth IRA. The converted money will still be subject to tax, but there won’t be a 10% penalty added on top of that. Conversion can be something you want to do to ensure you have streams of tax-free income in retirement.

When converting, you need to pay attention to your tax bracket in the year that you convert to avoid moving up into a higher tax bracket or incurring one of the “stealth taxes,” such as increased Medicare Part B premiums. Of course, you won’t have to worry about Medicare premiums if you are under 65 at the time of the switch since you are not yet eligible for Medicare.

You must begin drawing distributions from all retirement accounts at the age of 73, except for Roth IRAs, so you should transfer as much money as you can into Roths before then.

Take advantage of it when you reach the sweet spot. Put as much money as possible in your TSP and other tax-advantaged retirement accounts if you still need to catch up to the sweet spot.

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Email: [email protected]
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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure:
Disclosure:
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