Dear Liz: I appreciate your efforts in helping people manage their finances.
I’ve been reflecting on the role of Social Security in quality of life. I began receiving benefits at 65, which is when I officially retired. At that time, I was fully employed, so it wasn’t like I had to depend on it to get by. But having that extra income has allowed us to explore all seven continents, assist our children with their debts, and just enjoy life a bit more with those additional funds.
Right now, the full retirement age is set at 67, meaning there’s less time between reaching that age and hitting the maximum benefit at 70. Still, that time difference can be significant, which can support those dreams of a motorhome or a world cruise.
Answer: Developing a solid financial plan is about finding a balance between spending today and saving for tomorrow. If you overspend early in retirement, it could leave you struggling later on. The challenge is that we can’t predict how long we will live or how our health will hold up. You might want to spend on experiences, like travel, but find yourself short on funds later.
Moreover, it’s crucial to remember that when one spouse passes away, the household will lose one Social Security benefit. This can result in a drastic dip in income for the surviving partner. Typically, survivors will receive the larger of the two benefits, and it’s usually wiser for the higher earner to delay claiming their benefit as long as possible.
Dear Liz: When discussing the required minimum distributions from retirement accounts, please highlight the option for eligible charitable distributions.
Those who are fortunate enough to not need the income can directly donate their required distributions from their IRA to a nonprofit of their choice. This way, they can avoid having it counted as income, which means no taxes on that amount. I’m looking forward to making charitable contributions starting at 73 for some of my favorite causes.
Answer: There’s actually no need to wait for that age. You can start making qualified charitable distributions from your IRA as soon as you turn 70½. For 2025, the limit stands at $108,000 per individual. If you’re leaning towards this route, make sure you understand IRS regulations on these distributions and keep the tax implications in mind.
