Navigating Financial Milestones: A Guide to Age-Based Planning

Planning considerations

1. Consider Roth conversions before reaching certain milestones

Timing a Roth IRA conversion is key when it comes to certain age-based milestones, such as retirement or claiming Social Security. For example, converting to a Roth IRA shortly before age 65 may increase IRMAA surcharges for Medicare Parts B & D. This is because Medicare considers income from two years prior to enrollment at age 65 when determining if surcharges apply. Those at higher income levels may face higher premiums. For 2026, taxpayers with modified adjusted gross income exceeding $109,000 ($218,000 for couples filing a joint return) will be subject to higher Medicare Part B premiums.

2. Consider a qualified charitable distribution (QCD) if over age 70½

If you are not relying on a required minimum distribution (RMD) to meet current income needs and planning to claim the standard deduction, consider donating IRA assets to a qualified charity. A special provision of IRAs allows account owners to donate up to the annual IRS QCD limit ($111,000 in 2026), which is indexed for inflation.

3. In-service, non-hardship withdrawals

Some 401(k) plans allow in-service, non-hardship withdrawals—without providing proof of hardship—if the participant has reached age 59½ or has met the requirements specified by the plan document. These participants have the option to directly transfer savings to an IRA without penalty or withholding, assuming certain conditions are met, and the plan allows it. Transferring savings from the employer plan to an IRA may allow access to a broader range of investment choices, for example. However, there are other reasons why maintaining savings within the employer plan may be more beneficial so a thorough analysis depending on the specific circumstances is recommended.

4. It might pay to delay Social Security

One of the biggest mistakes retirees make is deciding to begin Social Security benefits too soon. In fact, about 60% of workers sign up for Social Security before reaching full retirement age (FRA). When claiming at the earliest age of 62, benefits may be reduced up to a maximum of 30%. Additionally, further earnings limitations will be imposed if the beneficiary has earned income from employment before FRA. By delaying the start of Social Security benefits, beneficiaries will receive higher benefits. In essence, they receive an 8% raise for each year they delay taking benefits between FRA and age 70. There are no incentives to delaying one’s retirement benefits past age 70.

5. Take distributions before your RMD age

The original SECURE Act raised the RMD age from 70½ to age 72 effective in 2020. A subsequent change further extends the RMD age to 73 and eventually to age 75 in 2033. Even with the RMD age increased, you may consider accelerating income if you are in a lower tax bracket. For those that are already subject to RMDs, consider taking larger RMDs than required to “fill up” favorable tax brackets, depending on personal tax circumstances.

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