As a teenager you were keenly aware of milestone birthdays that triggered important events like getting a driver’s license or earning the ability to vote.
But what about turning 70?
For the 2.5 million or so baby boomers expected to become septuagenarians this year, you are once again reaching a key age in the eyes of the government, which can have a big impact on your money if not planned for properly.
So before blowing out the birthday candles, it’s time to take a look at your finances.
Check required minimum distributions
Starting the year you turn 70½, you have to take withdrawals, known as required minimum distributions, from any pretax retirement accounts including your 401(k) and most IRAs.
Taking money from these accounts is something many retirees have been able to put off until now, said Judith Ward, senior financial planner with T. Rowe Price.
“We’re seeing a good amount of people that haven’t had to use their retirement savings,” she said. That’s because many older boomers still have pension income and can cover their expenses using that as well as their Social Security benefit, Ward said.
If you haven’t begun drawing down these accounts, you’ll have to start, and any withdrawals will be subject to federal and in many cases state income taxes.
“The first step is to look at all your retirement accounts and assess which ones are subject to RMDs and how much that distribution will be,” said Ward.
You can do this by checking out the IRS worksheet or by working with a tax advisor.
Claim Social Security
If you haven’t already, begin taking Social Security, even if you plan on continuing to work.
At this age you can still be employed and receive the maximum benefit amount. The extra money will only help, according to Ward.
The money you make will count toward your best 35 years for determining benefits. So, what you’re earning today is replacing something you’ve earned years ago, she said.
Rebalance your investments
Use this milestone to look at how your money is invested. Most important for this age period is balancing the need for growth with risk.
“One thing to consider is longevity. The chances of you living into your 90s is greater because you’ve already reached age 70. Some allocation to stocks is a way to maintain purchasing power,” Ward said.
She suggests putting 20 percent to 50 percent in stocks, 35 percent to 50 percent in bonds and 10 percent to 30 percent in short-term investments like cash or money-market accounts.