Meaningful advice for milestone moments
By Kristi Ellington
LPL Financial
Editor’s note: This is the first column by Kristi Ellington. Her
column will appear every other week.
As a new contributor to the Weekend Pinnacle, I would like to
establish a foundation for upcoming articles. The following
overview is presented to help you to become more familiar with
meaningful milestones that can have significant financial impacts
to you and your families.
By Kristi Ellington
LPL Financial
Editor’s note: This is the first column by Kristi Ellington. Her column will appear every other week.
As a new contributor to the Weekend Pinnacle, I would like to establish a foundation for upcoming articles. The following overview is presented to help you to become more familiar with meaningful milestones that can have significant financial impacts to you and your families.
Milestones are marked by many different events; some obvious, others not; some expected, others not; some welcomed, others – well, maybe not really. Regardless, milestones are one measure of our lives; those events that shape us and determine much of what each of us is all about.
Milestone moments can impact on our lives in many different ways. They may signal a change in lifestyle, a change in where we work or live, a change in our health and typically they will affect some level of change in our financial situations.
Some milestones are passages in life: the birth or adoption of a child, high school graduation, college graduation, empty nester, a move to a new city, purchasing your first home, marriage, divorce, being suddenly single, retirement, inheritance, a new job, a job promotion, job loss, a new business and sale of business.
Many milestones are passages in aging, such as 18, 21, 30 and subsequent decades. Those of us who are on the other side of it well remember the Big 50!
Some milestones are perhaps not major, but significant. Most folks have memories of buying their first car or their first new car, of adopting a new pet or embarking on a special vacation.
Other milestones are major and significant: disability or serious illness; the need to provide additional levels of support for a loved one; and most heartbreaking of all, the loss of a loved one.
Financial aging generates another set of milestones. For example, reaching age 59 1/2 or 60. The following is a brief outline of what you may want to review at different ages:
Birth – Consider starting a college savings plan.
Age 18 – Contributions may no longer be made to Coverdell ESA.
– Investment income no longer taxed at parent’s tax rate under “kiddie tax” rules unless child is a full time student.
Age 19-24 – Children may no longer be covered by parent’s health insurance unless in school. Check your individual health plan.
– Kiddie tax still in effect for full time students under age 24.
Age 30 – Coverdell beneficiaries must withdraw assets within 30 days unless considered a special-needs beneficiary. Account may be extended if owner changes beneficiary or rolls assets to a different beneficiary’s ESA.
Age 50 – Catch-up contributions may be made to IRAs and qualified retirement plans.
Age 55 – Penalty-free distributions may be taken from 401(k) plans if retired.
Catch-up contributions may be made to HSAs.
Age 59 1/2 – Penalty-free distributions may be taken from IRAs and qualified plans, and from Roth IRAs if the account has been open at least five years.
– May be eligible for an in-service distribution from 401(k) plans.
Age 60 – Application may be made for early Social Security benefits by widows or widowers claiming benefits under spouse’s earnings record.
Age 62 – Application may be made for early Social Security benefits under own earnings record; amount will be reduced.
Age 65 – Application should be made for Medicare benefits.
Age 66 – If not already receiving Social Security, application should be made for Medicare.
– First-wave baby boomers (those born from 1943-1955) are now eligible for full Social Security benefits.
Age 70 – Maximum Social Security benefit begins.
Age 70 1/2 – Required minimum distributions (RMDs) from IRAs begin.
Avoid potential 50 percent tax penalty.
As you can see, there are many milestones that can trigger a financial occurrence or change in your circumstances. With ever-changing laws, rules and regulations, these are good times to consult with your professional advisors, tax professionals, attorneys and financial consultants to insure you have up-to-date information to make well informed decisions on how to best maneuver through these events.
It is my goal to provide you with informative and meaningful articles of interest to help you stay abreast of current developments as you prepare to successfully meet the milestones in your lives. I would love to hear what is important to you and your families, what has been helpful, or not, and what you would like to hear more about – your feedback is welcomed and encouraged!
Kristi is a local independent financial consultant who has been providing financial guidance to her clients for the past sixteen years after a twelve year career in banking. Kristi Ellington is a registered representative with and securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. She can be reached in her Hollister office at 831-634-1144, her Gilroy office at 408-848-0874, or at www.kristiellington.com.
