Aging certainly comes with plenty of problems. Wrinkles, gray hair, vision and hearing loss and general aches and pains are all common ailments. But there are also many perks of growing older, especially where your finances are concerned.
Here's how getting older can save you money:
-- Senior discounts.
-- Travel deals.
-- Tax deductions for seniors.
-- Bigger retirement account limits.
-- No more early withdrawal penalty.
-- Social Security payments.
-- Affordable health insurance.
-- Senior services.
-- Free college.
If you're willing to admit your age, you may be able to get a discount on your next restaurant meal or retail purchase. Many museums, movie theaters and entertainment venues provide reduced admission prices to people who are above a certain age.
AARP negotiates discounts for members, who can join as early as age 50, often allowing you to start using senior discounts at a younger age. Discounts are sometimes available on necessities such as groceries and clothing. Not all senior discounts are publicized, and sometimes they are given only to those who request them and show proof of age.
"Discounts are available through a lot of different venues," says Dave Austin, former vice president of marketing services for AARP Services Inc. "There's a lot of money to be saved if you are willing to ask."
[See: 10 Great Senior Discounts]
Many hotels and rental car companies will provide a discount to seniors who are above a certain age or AARP members. Travelers are eligible for 10% off some Amtrak fares at age 65 and older and 5% off Greyhound bus tickets beginning at age 62. Citizens age 62 and older can get a National Park Service lifetime senior pass to over 2,000 federal recreation sites for just $80 in person ($90 online or via mail).
Tax Deductions for Seniors
People age 65 and older are eligible for several extra tax deductions. Seniors are eligible to claim a bigger standard deduction than younger taxpayers. The standard deduction is $1,300 more for each spouse who is age 65 or older, or $2,600 if both members of a married couple meet the age requirement. Individuals age 65 and older can increase their standard deduction by $1,650 in 2020.
If you are above a specific age and sometimes below a certain income level, you might also qualify for property or school tax deferrals or exemptions. "You have to check your state, county or local city rules," says Jackie Perlman, principal tax research analyst at the Tax Institute at H&R Block. "Every state is different, and sometimes the municipalities within the state are different."
Bigger Retirement Account Limits
Workers age 50 and older can defer paying income tax on as much as $26,000 that they contribute to a 401(k) plan, $6,500 more than younger workers. The IRA contribution limit is also $1,000 higher for workers 50 and older, or $7,000 in 2020.
The catch is that you are typically required to withdraw money from traditional retirement accounts and pay the resulting tax bill after age 70 1/2. However, retirees will be permitted to skip their 2020 required minimum distributions due to provisions of the coronavirus relief bill.
Retirement account owners age 70 1/2 and older can also avoid paying income tax on any amount up to $100,000 that they transfer directly from an IRA to a qualifying charity. "It's got to roll over directly from the IRA to the charity as a trustee-to-trustee rollover," Perlman says. "You can't take money out of it and put it in a checking account and then write a check."
Taxpayers age 55 and older who have a high-deductible health plan are also eligible to put an extra $1,000 in a health savings account.
No More Early Withdrawal Penalty
Once you turn age 59 1/2, there's no more 10% penalty to withdraw money from your IRA. And if you leave your job at age 55 or later, you can begin taking penalty-free 401(k) withdrawals from the account associated with the job you left at an even earlier age.
"If you get terminated from your job and you are 55 or older, you are not penalized for taking the money out," says Barbara Weltman, a tax and business attorney and spokeswoman for the book "J.K. Lasser's Your Income Tax 2020." "The 10% penalty goes away, but you are still paying tax on the withdrawal."
You will have to wait until age 59 1/2 to avoid the early withdrawal penalty on distributions from 401(k)s associated with previous jobs or IRAs. However, penalty-free retirement account withdrawals of up to $100,000 will be allowed at any age in 2020 for coronavirus-related expenses.
Social Security Payments
You can sign up for reduced Social Security payments as early as age 62 or claim the full amount you have earned at your full retirement age of 66 or 67, depending on your birth year. If you delay claiming your payments past your full retirement age up until age 70, you will earn delayed retirement credits that will further boost your monthly benefit.
"The later you start, the higher your benefit," Perlman says. These payments are adjusted for inflation each year and will continue for as long as you live.
Affordable Health Insurance
Retirees don't need to worry about finding a job that provides health coverage or the sometimes high out-of-pocket costs of health insurance plans purchased through state health insurance exchanges. Once you turn age 65, you can sign up for Medicare.
Most retirees don't pay anything for their Part A hospital insurance. The premium for Medicare Part B, which covers doctor's visits and medical services, is $144.60 per month for most retirees in 2020 (although some beneficiaries pay more), which can be deducted from your Social Security check so you won't get a bill. Retirees can fill in some of the co-payments and deductibles by purchasing a supplemental plan and get their prescription drugs covered through Medicare Part D.
Many communities provide low-cost taxi or van services to help seniors citizens get to doctor appointments or go grocery shopping. Some cities even provide free or discounted public transportation to people above a certain age.
Senior centers might provide low-cost meals, affordable classes and entertainment and an opportunity to socialize with other seniors. Your local library or community center might also have events specifically for older residents.
College costs are a major expense for young people. But retirees might be able to take classes for free or at a very low cost. Many public colleges and some private institutions provide senior citizen tuition waivers or allow older people to audit classes for free or a minimal cost on a space-available basis. And there are over 100 Osher Lifelong Learning Institutes on college campuses that offer affordable classes specifically for retirees.
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