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Financial Planning
Jan 2024

Financial Milestones

By Kevin Mahoney, CFP®, CIMA®

We reach many milestones throughout life. Some are celebratory in nature such as being able to drive at 16, vote at 18, have your first (legal!) drink at 21, or reaching momentous birthdays such as 50, 75 or 100.

Other milestones affect our financial lives, sometimes significantly. Unfortunately, these milestones are often shrouded in tax and legal nuances making them confusing, and as opposed to being celebratory, they tend to be reminders of our own aging.

While we do not have control of the ever-changing nuances, we do have the ability to plan ahead. In light of this, the below list of financial milestones should help you stay you on top of key decision trees:

Age 0

You can open and begin funding a 529 Plan for college. Hopefully you have a parent or guardian who is reading this and can do this on your behalf. Age 0 is also when the “kiddie tax” can start and lasts until age 18, or 24 if you are a full-time student. For 2024, your first $1,300 of unearned income is not taxed, your next $1,300 of unearned income is taxed at your tax rate, and any unearned income above $2,600 is taxed at your parents’ tax rate.

Age 14

In most states, including California, 14 is the age you can go to work and earn a paycheck. This also means 14 is the age at which you can open and fund an IRA or Roth IRA, which requires earned income.

Age 18

You are a legal adult now, which means you can get your own credit card and get a head start on building good credit. If there are any custodial accounts for your benefit (Uniform Transfer to Minor’s Act, Custodial IRA, Custodial Roth IRA, Custodial bank account), they most likely become yours at this point.

Age 25

Legally, you can rent a car at age 18, but many car rental companies have minimum ages of 20 or 21, and 25 is the age at which you can rent a car without being subject to an additional fee.

Age 26

Though there are various state exceptions, 26 is generally when you are booted off your parents’ health insurance plan and must find your own coverage. Seeking an employer that provides health care coverage and other benefits like a retirement plan with an employer match could be worth thousands of dollars a month.

Age 50

This is the point at which you can make “catch-up contributions” to your retirement accounts. For 2024, those under 50 can contribute $23,000 to a 401(k), but if you are 50 or older, you can contribute $30,500. Similarly, for IRAs, those under 50 can contribute $7,000, whereas those 50 or older can contribute $8,000.

Age 55

If you are a California resident age 55 or older you can move anywhere within the state and transfer your home’s tax basis up to the value of the home you are selling. In other words, if your tax basis is $600,000, you sell your home for $1 million and buy another home for $1 million, you tax basis does not change. If instead, the home you buy is $1.2 million, the $200,000 above your first home’s value is added to your tax basis, so your tax basis in your new $1.2 million home would be $800,000.

Age 59 ½

This is the age at which you can withdraw money from tax-deferred retirement accounts without incurring a 10% penalty.

Age 60

If you are a widow or widower, age 60 is when you can begin your Social Security survivor benefit.

Age 62

You can begin your own, albeit reduced, Social Security benefit at 62.

Age 63

This is the year your income will be used to set your initial Medicare premiums at age 65 since there is a two-year look-back.

Age 65

You can start Medicare insurance. You are eligible to enroll as early as 3 months before you turn 65.

Age 66 – 67

Depending upon your birth year, this age range is what the Social Security Administration considers your Full Retirement Age, which means you can initiate your Social Security benefits without being subject to an earnings test that can reduce your benefit.

Age 70

This is the latest you can delay taking your Social Security benefit and enjoy the 8% per year benefit increase for doing so. In other words, if you have not started your Social Security benefit by now, get on it!

Age 70 ½

You are eligible to make Qualified Charitable Distributions (QCDs) from your retirement accounts, which is the process of making a charitable donation directly from such an account. You do not get a charitable tax deduction for doing so, but the distribution does not count as taxable income. This becomes particularly useful once you are subject to Required Minimum Distributions (RMDs – see below Age 72-75) since these donations count toward your RMDs. However, it can be worth considering QCDs as early as 70 ½ to reduce the size of your retirement accounts and therefore the size of your future taxable RMDs.

Age 72 – 75

Depending upon your birth year, this is when you must begin withdrawing money from your retirement accounts in the form of Required Minimum Distributions (RMDs). There is a 10-25% penalty for not taking RMDs, so this is an expensive one to miss!

The above milestones list should keep you attuned to the critical financial junctures, however, there are many conditions and exceptions, so when you hit each milestone, be sure to investigate if, and how, it applies to you.

The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.


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