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Age 59 ½ isn’t considered a popular milestone, but it probably should be. At this age, a flurry of new financial options and benefits become available to you.
It’s also a good time to double-down on your investment strategy so that you can make your retirement as comfortable as possible.
If you’re quickly approaching or already at this underrated milestone, here’s what you should know.
Once you turn 59½, retirement account withdrawals are no longer subject to the 10% early withdrawal penalty, making it easier to access your 401(k), Roth IRA, or other qualified plans. While tapping into these funds isn’t always necessary, having the option provides added financial flexibility as you approach retirement.
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This age is also ideal for starting Roth IRA conversions—moving money from traditional retirement accounts into a Roth IRA. You’ll pay taxes now, but future withdrawals will be tax-free. Converting before age 73, when Required Minimum Distributions (RMDs) kick in, can also help manage your tax burden.
Since the median retirement age is 62, by 59 ½, you should be ramping up your efforts in this final stretch.
Given the complexity of these calculations, working with a trusted, pre-screened financial advisor can help you develop a solid retirement plan and optimize your withdrawal strategy.
According to research by Vanguard, people who work with financial advisors see a 3% increase in net returns. This difference can be substantial over time.
If you’re unsure which path to take amid today’s market uncertainty, it might be a good time to connect with Advisor.com.
This online platform connects you with vetted financial advisors best suited to help you develop a plan for your new wealth.
Just answer a few quick questions about yourself and your finances and the platform will match you with an experienced financial professional. You can view their profile, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
You can view advisor profiles, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
Read more: Rich, young Americans are ditching the stormy stock market — here are the alternative assets they’re banking on instead
Every single year of added income or compounded growth can make a big difference to your lifestyle in retirement. With that in mind, 59 ½ is the ideal age to set yourself up so your golden years are as comfortable as possible. Aggressively paying down any outstanding debt is a great idea at this age. Surprisingly, 97% of retirement-age Americans are still in debt, according to USA Today.
By actively reducing your debt between age 59½ and retirement, you can significantly improve your financial outlook compared to many other retirees.
If you have substantial equity in your home, consider consolidating your debts and pay it down with a Home Equity Line of Credit (HELOC).
A HELOC is a secured line of credit that leverages your home as collateral. Depending on the value of your home and the remaining balance on your mortgage, you may be able to borrow funds at a lower interest rate from a lender as a form of revolving credit.
You could also double down on your savings and investment strategy before your income stops. You can start making catch-up contributions to your 401(k) and other retirement plans from the age of 50, according to the IRS, but 59 ½ isn’t too late to start doing so.
Finally, this is the right age to consider all the subjective aspects of your retirement lifestyle. Take the time to figure out what you value most and create a strategy to make that possible in this final stretch before you leave the workforce. That’s why it’s important to be consistent in building a cash cushion for your retirement.
Putting your cash in a high-yield checking or savings account can help you grow your cash cushion at a faster rate.
These typically offer a much higher APY on deposits. For instance, some offer 4.00% against the national average of just 0.42% APY offered by traditional savings accounts.
This way, you can make the most of every dollar in your retirement planning.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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