Age Matters: Important Ages for Tax and Financial Milestones

 Just a good summary list of all the ages that matter in the tax and financial sense.

For Children and Young Adults

• Age 13:

  • Childcare Tax Credit: Parents can claim childcare expenses for the Childcare Tax Credit only until the child turns 13 (unless the child has a disability).

• Age 18:

  • Child Tax Credit Ends: The Child Tax Credit ends in the year a child turns 18.

  • Kiddie Tax Rules Apply: Children under 18 (and in some cases up to 23) with unearned income may have it taxed at their parents' tax rate.

  • Earned Income Matters: At 18, individuals can open a retirement account like a Roth IRA if they have earned income.

• Age 19 (or 24 if a student):

  • Dependent Status: Parents can claim a child as a dependent until age 19, or up to 24 if the child is a full-time student.

• Age 26:

• Health Insurance: Children can stay on their parents' health insurance plan until they turn 26.

Midlife Milestones

• Age 50:

  • Catch-Up Contributions Begin: You can make additional “catch-up” contributions to retirement plans, such as 401(k)s, 403(b)s, and IRAs. For 2025, the limits are an additional $7,500 for 401(k)s and $1,000 for IRAs.

• Age 55:

  • HSA Catch-Up Contributions: Eligibility to contribute an extra $1,000 annually to a Health Savings Account (HSA).

  • Early Retirement Withdrawals: If you leave your job in the year you turn 55 or later, you can take penalty-free withdrawals from 401(k) or 403(b) plans.

• Age 59½:

• Penalty-Free Withdrawals: You can withdraw from traditional IRAs and 401(k)s without incurring the 10% early withdrawal penalty, although income tax still applies.

Retirement Planning

• Age 62:

  • Social Security Eligibility: This is the earliest age you can start claiming Social Security benefits. However, benefits will be permanently reduced if taken before full retirement age.

• Age 65:

  • Medicare Eligibility: At 65, you qualify for Medicare (Parts A, B, and D).

  • HSA Contributions End: Once enrolled in Medicare, you can no longer contribute to a Health Savings Account (HSA).

• Age 66-67:

  • Full Retirement Age (FRA): Depending on your birth year, this is when you qualify for 100% of your Social Security retirement benefits.

• Age 70:

• Maximized Social Security: If you wait until age 70 to claim Social Security, you’ll receive the highest possible monthly benefit.

Later Years

• Age 73:

  • Required Minimum Distributions (RMDs): RMDs from traditional IRAs and 401(k)s must begin unless you’re still working. This age applies to individuals born in 1951 or later.

• Age 75:

  • Catch-Up Contribution Rule (2025): Individuals earning more than $145,000 annually must make catch-up contributions to 401(k) plans as Roth contributions.

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Conclusion

Understanding these key ages can help you make informed decisions about your financial and retirement planning. Whether you’re helping a child transition to independence, preparing for retirement, or managing healthcare and taxes, knowing these milestones can give you a clear advantage. Planning ahead is essential to make the most of your financial opportunities and to avoid costly mistakes.

Stay proactive, and consult a financial advisor to ensure you’re leveraging every benefit available at these critical ages.

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— Dr. Tree (@lannyland.com) January 8, 2025 at 11:46 AM

P.S. Remember, the easiest way to keep up with my journey is by visiting blog.lannyland.com