Preparing for retirement means a lot more than dusting off golf clubs, passports and your chaise lounge… Anyone near retirement age needs to keep up with all filings: taxes, Social Security, Medicare and retirement accounts. Here is your guide to key dates to help get the most out of your retirement finances and retirement benefits
Here’s what’s in store for 2016:
If you’re retired and drawing income from a pension or other retirement plan like a 401(k) or Individual Retirement Account (IRA), you have to take a required minimum distribution by April 1 by the time you turn 70 ½.
You also have to take a distribution for all subsequent years on Dec. 31, including the year in which you received your first distribution if you waited until April 1 after turning 70 ½.
This is the big one. For 2016, tax day falls on April 18. For most people, filing tax documents by this date can result in a refund. In 2014, the average tax return was more than $2,900, according to the IRS.
Roughly eight out of 10 Americans will get a refund from filing, according to data from the Internal Revenue Service. While the promise of a little extra cash back in your pocket could make you want to file as soon as possible, keep in mind April 15 (or April 18 this year) is not the only date retirees need to be aware of.
A lot of retirees pay their taxes quarterly. When you leave the workforce, you may have to estimate your income and pay quarterly taxes ahead of the April deadline when most American have to file. This is because you are no longer paying federal taxes as you would while you are still in the workforce, which is typically taken right out of your paycheck.
Once you start tapping into your retirement accounts, Social Security benefits or pension, you will have to start submitting your estimated payments. You won’t have to pay estimated taxes on a quarterly basis if you opt to have taxes withheld from these income sources.
If you’re paying estimated tax, you are required to submit the final payment for 2015 on January 15. The first deadline for quarterly taxes in 2016 is April 18, also the federal tax filing deadline. Sequential quarterly tax deadlines for the rest of the year fall on June 15 and September 15.
One of the biggest retirement decisions any of us make is when to start Social Security. The longer you wait, the bigger your monthly checks will be.
However, if are married or divorced, there were some tricks you could do that enabled spouses to collect each other’s benefits and then switch to their own benefit amounts later. These “file and suspend” and “restricted applications” loopholes are going away on May 1.
These loopholes have enabled people who are (or who have been married) to collect spousal benefits between their full retirement age and age 70 and defer collecting their own (larger) benefits until later.
You can learn more about spousal benefits here. If this is a strategy you could benefit from, you need to act quickly. You will no longer be able to take advantage of these options after May 1, 2016.
In fact, you will need to file for the benefits by April 30.
Retirees living abroad, who have more than $10,000 in a foreign bank account in 2015 must file FinCEN Form 114 with the Treasury Department by June 30, 2016. (In 2017, this deadline will be on April 15.)
Turning 65 has its perks, including becoming eligible for Medicare. When you sign up for Medicare, you can select your supplemental coverage.
However, you should assess your supplemental coverage every year. There are specific times during the year that you can enroll in Medicare drug and Medicare Advantage plans and adjust your coverage and benefit options. Missing these dates could leave you vulnerable if you aren’t getting the coverage you need.
The open enrollment period for Medicare Part D prescription drug plans starts October 15 in 2016, which allows you to make changes to your list of covered drugs and prices. Use this time to shop for the best prices for what you need year to year.
If you did a Roth Conversion in 2015 and the value of the assets in that account have declined in value since the conversion, then you may want to consider recharacterizing the conversion. (When you recharacterize, the money goes back into a traditional IRA and you won’t owe ordinary income tax on the amount converted. If your Roth dropped in value, you would avoid paying taxes on the money you lost.) The deadline for doing this in 2016 is Oct. 17.
Retirement planning is not something you do once and forget about. Personal finance is actually a fluid process. Preparing for retirement involves assessing your own retirement plan and that is something you need to do before retirement, during retirement and after retirement.
It is important to take stock of what you have and what you need (now and into the future) every three to six months. There are external factors that impact your finances (stock markets, real estate prices, inflation, etc..) and internal factors (your health, family, goals, etc..) that can have a big impact on your personal retirement plan.
A good retirement calculator can help you with these assessments. The NewRetirement Retirement Calculator is a detailed and highly personalized tool that saves your information so it is easy to update. Best of all, the planner gives you immediate feedback on the impact of any updates on your overall financial health.
