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As the new year begins, most retirees aren’t thinking about tax deadlines and health care. But they need to, since their employers are no longer taking care of these duties. In addition, there are many details such as reviewing estate plans, contributions to charities, retirement portfolios, and family gifts that need to be completed each year.
We’ve put together a list to help you help your clients remember these important dates and tasks. While tax laws and Medicare benefits may change, the fact is you still have to deal with them. Help your clients retain peace of mind, knowing they are tending to everything that is important to them in a timely fashion.
Important dates
Health care
Although most people don’t realize it, Medicare operates on a very strict schedule. Seniors need to enroll within a seven-month window surrounding their 65th birthday, unless they are covered by a qualified employer plan. If they are covered by an employer, they have a seven-month window to enroll when that coverage ends. If they miss both of these periods, they can enroll during the first three months of the year for coverage starting July 1. There is no enrolling outside of this time, and retirees may face penalties if not enrolled.
- Jan. 1—Mar. 31: General Enrollment Period
- Jan. 1—Feb. 14: Medicare Advantage Disenrollment Period (Those trying Medicare Advantage for the first time can leave the plan and return to Original Medicare.)
- Oct. 14—Dec. 7: Medicare Advantage and drug plan open enrollment
- Nov. 1—Dec. 15: Affordable Care Act open enrollment
Taxes
Retirees need to file income taxes even though they no longer receive a salary. Distributions from investment accounts and Social Security might all be taxable, depending on their particular situation. Retirees may be surprised to discover that they need to file taxes not once a year, but four times.
- Jan. 16: Estimated taxes for Q4 of 2017 due
- Apr. 1: Last day to take first IRA RMD without penalty
- Apr. 17: File income taxes or apply for extension
- Apr. 17: Estimated taxes for Q1 due
- June 15: Estimated taxes for Q2 due
- Sept. 17: Estimated taxes for Q3 due
- Sept. 30: Last day to determine beneficiaries after an IRA owner’s death
- Oct. 2: Extended trust and estate taxes due
- Oct. 15: Last day to undo a Roth IRA conversion
- Dec. 31: Last day for stocks, RMDs, itemized deductions, gifts to count for 2018 taxes
Birthday milestones
In addition to yearly dates, there are quite a few birthday milestones that mark when retirees are eligible for certain benefits or are required to take action. These age-related markers do not change in 2018.
- Age 55: Penalty-free distributions allowed from 401(k) if retired
- Age 59½: Penalty-free distributions allowed from IRAs and qualified plans, and Roth IRAs at least five years old
- Age 60: Can apply for early Social Security under deceased spouse’s earnings record
- Age 62: Can apply for early Social Security under own earnings record (benefits reduced)
- Age 65: Apply for Medicare (Parts A and B) beginning three months before birthday
- Age 66: Full retirement age for unreduced Social Security benefits
- Age 70: Apply for Social Security for maximum benefits
- Age 70½: Must start IRA required minimum distributions
Final quarter tasks
You know that the end of the year is a busy financial time. When dealing with a retiree, that period becomes even more important. Accounts need to be reviewed and actions taken so that your clients aren’t penalized the following year. Starting in September, work with them to reflect on the year behind and strategize for the year to come. Here are some tasks your clients must tackle:
- Project income for 2018 and 2019
- Review unrealized investment gains and losses
- Collect cost-basis information on sold investments
- Review sales of appreciated property
- Review potential credits and deductions
- Track donations to charity
- Take required minimum distributions
- Review Medicare enrollment options
- Review and fund trusts
- Contribute to college education accounts
- Gift cash to family
- Review any gifting plans
Annual review
And finally, retirees need to do an annual review just like all of your other clients. As people age, it becomes even more important to have procedures in place for incapacitation or health care crises. On the brighter side, retirees need to make sure that their income will remain steady for the years to come. Here is a list of what retirees must do at least once a year, and with more urgency than previously.
- Review and update health care directive/proxy, power of attorney, will, and trusts
- Review estate plan and letter of intent
- Adjust investment portfolios as retirement needs change
- Review beneficiaries on all pensions, IRAs, annuities, life insurance, investments, bank accounts, CDs, etc.
- Decide which trusts can save on current taxes, reduce estate taxes, and benefit heirs and charities
- Discuss potential gifting to families or charities
The start of a new year always brings with it a great sense of potential. This year, may you and your clients—retired, semi-retired, and pre-retirement—feel at ease knowing that you will accomplish all that needs to be done in a timely manner.