Age Wise Financial Milestones in Your 60s
Learn how wise planning for 6 milestone ages in your 60s can increase your retirement income. Understand the possible costs in ignoring these important milestone ages.
Milestone age 60: Earliest age most widowers and widows can start claiming Social Security survivors benefits.
Having lost a spouse, folks who choose to begin getting Social Security survivors benefits at age 60 would have more cash to use right away. However, they would be getting almost 30% less money than they would if they chose to wait until their full retirement age (FRA).
Deciding the most beneficial course of action depends on a widow’s or widower’s current and expected future financial circumstances. These circumstances include their primary insurance amount (PIA) and full retirement age (FRA), their deceased spouse’s PIA and FRA, and many other complex factors and rules.
As an example of the complexity, a widower or widow has the choice to first claim on the deceased spouse’s record and then switch to their own record. Alternatively, they can first claim on their own record and then switch to the deceased spouse’s record. Which path to follow would depend on an individual’s unique situation.
A widower or widow who remarries prior to age 60 would lose their eligibility to claim survivors benefits. At age 60, they can remarry and remain eligible to claim survivors benefits based on their deceased spouse’s record.
The Social Security Administration (SSA) offers information to help understand these complexities through publications and agents at local offices and over the phone. Knowledgeable financial advisors can also help.
Milestone age 62: A worker can begin receiving Social Security retirement benefits.
Workers who are eligible to claim Social Security retirement benefits can begin receiving as early as age 62. According to a report by the Congressional Research Service, 29% of new retired-worker beneficiaries in 2021 were age 62.
Some workers claim early because they need the added income right away to meet daily needs. Others fear that future benefit amounts may be reduced. Some are concerned they may not live long enough to receive benefits in later years. Still yet others believe they can invest the income and end up with more money than if they had delayed claiming.
The key disadvantage of claiming early is it permanently reduces the monthly benefit compared to the amount when claimed at the later full retirement age. Another disadvantage is that reduced monthly benefit causes smaller dollar increases when Social Security makes its cost-of-living adjustments. A third disadvantage is for folks who claim early and continue to work. They face the possibility of having some of their benefits offset by their earnings.
Some empirical evidence of these disadvantages is described in a study published in 2021 in the Journal of Pension Economics & Finance. That study found that workers who started receiving benefits at 62 had “persistently lower income into their 70s” compared to workers who started after age 62.
Another milestone age 62: Homeowners are eligible to apply for a reverse mortgage.
A reverse mortgage is a loan from which a homeowner receives payments from a lender. It stands in contrast to a regular (“forward”) mortgage where a homeowner sends payments to a lender to pay down a loan. In a reverse mortgage, a homeowner can receive payments from a lender because the homeowner is borrowing from the equity in their home.
The most common reverse mortgage is the government-sponsored Home Equity Conversion Mortgage, also known as a HECM. To qualify for a HECM, a homeowner must be at least 62 years and have significant equity in their home.
A homeowner in need of cash or income might use a HECM to borrow from their home equity to meet their cash or income needs. Even for a homeowner who has plenty of cash or income, a HECM can be useful as an added source of funds for an unexpected major expense or investment opportunity.
A HECM can be expensive. A homeowner generally must pay initial expenses such as origination fees, initial mortgage insurance premium and an assortment of closing costs. They also normally must pay ongoing expenses, e.g., annual mortgage insurance premiums (MIPs) and loan servicing fees.
A homeowner needs to watch out for potential frauds associated with reverse mortgages. Some homeowners have been deceived into taking out a HECM by unscrupulous people who then steal their money.
To help prevent fraud, the government requires a homeowner to meet with a government-approved reverse mortgage counselor who would ask questions to look for signs the homeowner might be a victim of fraud. This meeting generally lasts one to two hours and comes with a fee of $100 to $200. In some cases, the fee can be waived.
Milestone age 63: Start planning to eliminate or reduce Medicare IRMAA’s extra cost.
IRMAA (Income-Related Monthly Adjustment Amount) is an extra premium added to premiums for Medicare Part B and Part D. The extra premium increases the cost of an enrollee’s Medicare coverage. For 2024, IRMAA can add as much as $419.00 monthly to Part B costs, and $81.00 to Part D costs.
Every year, the Social Security Administration will look at an enrollee’s MAGI from two years prior (“2-year look-back’) to decide if they would need to pay IRMAA extra premiums. At age 63, folks wisely can plan to avoid or reduce the extra cost they might incur two years in the future at age 65 when they become eligible to enroll in Medicare.
To avoid or reduce IRMAA, folks can plan to keep their Modified Adjusted Gross Income (MAGI) below certain thresholds. In this context, MAGI is calculated by adding an enrollee’s adjusted gross income (line 11 on form 1040) together with tax-exempt income (line 2a).
Folks can lower their MAGI below IRMAA thresholds with several financial strategies. These strategies include contributing to charity, offsetting realized capital gains by harvesting capital losses, and spreading out Roth conversions.
Additionally, the SSA would waive IRMAA charges when there is a life-changing event such as work stoppage, divorce or death of a spouse. Folks who at age 63 experience such a life-changing event should notify SSA. This notification could forestall IRMAA charges two years in the future.
Milestone age 64 + nine months: First chance for most folks to enroll in Medicare.
The Initial Enrollment Period (IEP) begins three months before the month of an enrollee’s 65th birthday. It is a seven-month period. It ends three months after the month of an enrollee’s 65th birthday.
Folks who miss enrolling during their IEP can enroll during the General Enrollment Period (GEP). Each year, this period runs from January 1 through March 31. Coverage begins the month after enrollment during GEP.
The Medicare Annual Enrollment Period (AEP), also known as the Open Enrollment Period, runs from October 15 to December 7 each year. In this period, an enrollee can switch from Original Medicare to Medicare Advantage plan or vice versa. An enrollee in a Medicare Advantage plan can switch to a different Advantage plan or return to Original Medicare. This period also allows for joining, switching, or dropping a Part D plan. Changes made during the AEP take effect on January 1 of the following year.
Employees who work beyond age 65 and wish to continue coverage under their employer’s health insurance plan can delay enrolling in Medicare. When they stop working, they can avoid late enrollment penalties by signing up during their Special Enrollment Period (SEP). This period is the eight months after an employee exits their employer’s coverage.
The Medicare Advantage Open Enrollment Period (MA OEP) runs from January 1 to March 31. It is specifically for folks enrolled in Medicare Advantage. During the MA OEP, folks can make a one-time change to their coverage by switching to a different Medicare Advantage plan or returning to Original Medicare. They can choose to enroll or not enroll in a Part D plan.
Milestone age 65: Additional standard deduction on tax return.
Folks who are 65 or older at the end of the year get an additional standard deduction on their tax returns. For the 2024 tax year, single and head of household filers can take an additional $1,950. In the case of a married couple filing jointly, each person who is 65 or older gets an additional $1,550 standard deduction.
Milestone ages 66 through Age 67: Full Retirement Ages to get 100% of earned Social Security retirement benefits.
Full Retirement Age (FRA) is the age when a worker can claim 100% of their earned Social Security retirement benefits. Claiming earlier than FRA could reduce benefits by as much as 30%. Claiming later than FRA could increase benefits by as much as 30%.
The FRA is 66 for people born between 1943–54. For people born from 1955 through 1959, the FRA ranges from 66 + 2 months to 66 + 10 months. FRA is 67 for people born in 1960 or later.
The FRA also affects folks who work and at the same time receive Social Security retirement benefits. For folks who work and are under their FRA for the entire year, $1 in benefits will be deducted for every $2 earned above an annual limit. In 2024, this limit is $22,320.
For people who work, receive benefits, and are younger than their FRA for only part of the year, $1 in benefits will be deducted for every $3 earned above a threshold. The threshold in 2024 is $59,520. Reduction in benefits is figured out using income earned prior to the month FRA is reached. Once the month FRA is reached, folks can get their full benefits with no earnings thresholds.
Only wages from a job or net earnings from self-employment count towards the earnings limit. Pensions, annuities, investment income, interest, and government benefits do not count.
If retirement benefits had been withheld due to earning above thresholds, monthly benefits will increase starting at FRA to make up for the months when benefits were withheld. People who are receiving Social Security benefits and also working would still have to pay Social Security taxes on their earnings.
7 Takeaways: Financial Milestone Ages in Your 60s
Age 60: Most widowers and widows can start receiving Social Security survivors benefits but benefits would be reduced.
Age 62: A worker can begin receiving Social Security retirement payments, but payments would be less.
Age 62: Homeowners can get income flexibility with a HECM reverse mortgage, but a HECM can be expensive.
Age 63: Folks could eliminate or reduce future Medicare IRMAA costs, but they need to manage their MAGI.
Age 64 + nine months: First opportunity for most folks to sign up for Medicare. Enroll before deadlines to avoid late penalties.
Age 65: Your additional standard deduction might lower your taxes.
Ages 66 through Age 67: Your Full Retirement Age (FRA) is in this range. At your FRA, you can receive 100% of your earned Social Security retirement benefits.
Important Disclosures: Age Wisely Financial, LLC is a registered investment advisor offering advisory services in the States of Delaware, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training.
The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information on this site should not be relied upon for purposes of transacting in securities or other investment vehicles.
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Meet the Author
Kevin Lam CFP® CPRS™
Serving retirees and folks age 60+ in planning their retirement income, wealth, safety and legacy. Helping guide them on their personal finance and life journeys with understanding, wisdom and care. With more than 45 years of finance experience, I am a flat-fee, advice-only financial planner based in Wilmington, DE working with clients virtually nationwide.
