At 65, a lot of decisions arrive at once: Medicare, Social Security, retirement accounts and sometimes retiring itself. Looking at them together, instead of one at a time, can help them work better as a plan.
- Look at all income sources together
- Each source is taxed differently
- Your income affects Medicare premiums
- A plan can be updated as life changes
1. What are my sources of income?
List everything you expect: Social Security, pensions, part-time work, rental income, interest and withdrawals from savings or retirement accounts. Seeing them on one page is often the first step toward a clear plan.
2. What do I need each month?
Write down your regular costs, such as housing, food, insurance and healthcare. Then add the less regular ones: travel, gifts, home repairs. Many people are surprised by how much healthcare can add, so include Medicare premiums and out-of-pocket costs.
3. How is each source taxed?
Not all income is taxed the same way:
- Withdrawals from traditional IRAs and 401(k) plans are generally taxed as ordinary income.
- Qualified Roth withdrawals are generally tax-free.
- Part of your Social Security benefit may be taxable, depending on your other income.
- Investment gains and dividends may be taxed at different rates.
The order in which you draw from different accounts can change the total tax you pay over time.
4. How does my income affect Medicare?
Medicare Part B and Part D premiums can go up for people with higher income, based on a tax return from two years earlier. Large one-time income, such as a big sale or a Roth conversion, may be worth reviewing ahead of time.
5. What could change?
Plans work best when they allow for change. Think about a spouse's needs, health costs, a move, or changes in tax law. A plan that you review every year can be adjusted along the way.
- List every income source and its start date
- Estimate monthly and yearly spending
- Note which accounts are pre-tax and which are not
- Ask how your income may affect your Medicare premiums
- Set a date each year to review your plan
A check-up at 65 sets the tone for the years ahead. If you would like help pulling the pieces together, let's talk.
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This article is general information, not tax or investment advice for your situation. Tax rules change over time. Talk with a qualified professional before making decisions.
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