Saturday, April 20, 2024

10 Financial Perks of Getting Older

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Few seniors would tell you that growing old is a complete bowl of cherries. But there are plenty of perks, starting with grandchildren, quitting full-time work (hopefully, eventually) and a handful of financial benefits, some of which might surprise you.

You’ve probably heard of the senior discounts that await, for instance, but you may not expect such a wide array of them.

Read on for many financial reasons to feel a little happier about growing older.

1. Senior discounts

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Discounts abound when you reach a certain age. What age that is varies, depending on the merchant or institution. You can be as young as 50 for many discounts from dues-collecting seniors organizations like AARP and the Association of Mature American Citizens. AARP members, for example, claim discounts on hotels, restaurants, vehicle purchases, airfare and more.

At age 60 (and in some cases 55), the realm of senior discounts really opens up. Eligibility and details vary, so ask or look up the rules on a company’s website.

Look for senior discounts from wireless carriers, hotels, restaurants, pharmacies, car rentals, health clubs and studios, cruises and more. The occasional grocery store gets into the act: Fred Meyer, for instance, offers shoppers 55 and older an added 10% off specific items each first Tuesday of the month.

Also, ask at movie theaters and when buying a ticket or pass for public transportation. Taking up crafts or painting? Check out the 10% senior discount at Michaels. Ask at your financial institutions. In short, ask about a senior discount whenever you pull out your wallet.

2. Social Security retirement benefits

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Who doesn’t want a monthly paycheck in old age?

You can claim Social Security benefits early, generally starting at age 62. But you’ll get less — permanently — for starting early.

At “full retirement age” — which is 66 if you were born between 1943 and 1954, for instance — you’ll receive the full benefit earned from your working years. Full retirement age is 67 for those born in 1960 and beyond.

If you really want to cash out from this program, wait beyond full retirement age up to age 70 to earn an even-bigger monthly paycheck for life. After 70, there are no further benefit increases.

3. Penalty-free retirement account withdrawals

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When you must tap a retirement account for cash before reaching age 59 1/2, the IRS calls the withdrawal an “early” or “premature” distribution and in many cases charges a 10% penalty.

Cross the age threshold beyond 59 1/2, though, and you are in the clear. Then, the money is yours to withdraw penalty-free.

4. A higher standard tax deduction

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American taxpayers aren’t taxed by the IRS on every dollar we earn. Almost all taxpayers are eligible to claim the standard deduction, which reduces your taxable income by a flat amount — by $13,850 for 2023, for instance, if you file your taxes as a single person.

After their 65th birthday, taxpayers generally qualify for an even higher standard deduction. (If you are blind you may be eligible for this increased standard deduction, too, regardless of age.)

For qualifying taxpayers, the increase for the 2023 tax year is $1,500 per married person or $1,850 per single person. So a single person over the age of 65, for instance, would have a standard deduction of $15,700 ($13,850 + $1,850).

Read “Here’s Your New Standard Deduction and Tax Rate for 2023” for a fuller explanation.

5. A more lenient tax filing requirement

Senior couple doing taxes
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For most taxpayers, their standard deduction also serves as the threshold that determines whether they are required to file a federal tax return in the first place. This means that if your standard deduction is higher, you can earn more income before being required to file a return.

For example, a single person who will not reach age 65 by this year will not have to file a tax return for 2023 if they earn a gross income of less than $13,850 this year. But a single person who will turn 65 or older this year can escape filing if their gross income is $15,700 or less this year.

6. Higher contribution limits for retirement accounts

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Putting money aside for retirement in a workplace or individual retirement account is a smart way to save for the time when you’ll stop pulling a salary.

The IRS’ maximum base annual contribution for most types of workplace retirement accounts is $22,500 for 2023. When you hit age 50, though, that changes. Your maximum contribution limit grows, thanks to what the IRS calls “catch-up” contributions. For 2023, the IRS lets people 50 and older make a $7,500 catch-up contribution to such retirement accounts, for a total contribution of $30,000.

People age 50 and older also can contribute more to an IRA. The catch-up contribution amount for IRAs is currently $1,000. That’s on top of the 2023 base contribution limit of $6,500, for a total contribution of $7,500.

Read more about the current contribution limits, check out “IRS Hikes Nearly All Retirement Account Thresholds for 2023.”

7. Higher contribution limits to an HSA

Health savings account
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Catch-up contributions also are allowed for health savings accounts (HSAs): The catch-up limit is $1,000 per year. That’s on top of the base contribution limit, which for 2023 is either $3,850 (for eligible taxpayers with self-only health insurance coverage) or $7,750 (for those with family coverage).

HSAs, used with high-deductible health insurance plans, are savings or investment accounts that you fund with earnings that are exempt from income tax. You can pull out the money tax-free, too, if you spend it on qualifying medical or dental expenses.

Learn “3 Ways a Health Savings Account Can Improve Your Finances.”

8. Medicare benefits

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Medicare is the federal health insurance program covering medical and prescription drug costs for people age 65 and older and those with certain disabilities and health conditions.

Medicare may not cover all of your medical costs. And you’ll pay monthly premiums and copays to participate. But for many seniors, it covers a lot for little. Here is a list of Medicare’s fees.

Vanguard, using 2018 costs, valued the loss of subsidies from workplace medical insurance at retirement at $5,300 a year, on average. So, if you have a good workplace medical plan, Medicare can feel like a step down, financially.

But if you must leave a workplace insurance plan and haven’t reached Medicare age, your choice isn’t between a robust employer program and Medicare: It’s between Medicare and finding medical coverage on an open market, meaning an Affordable Care Act (ACA) insurance exchange.

When Vanguard checked:

  • The median cost of health insurance for a 64-year-old on the open market was $12,800.
  • The median cost of Medicare for a 65-year-old was $5,200.

So, you can see why retirees typically rejoice when they reach age 65 and become eligible for Medicare.

Now that you know, as you approach 65, start focusing on Medicare enrollment.

9. Other government services

Happy senior couple
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In the United States 5.5 million (7.1%) seniors age 60 and over faced hunger in 2021, according to Feeding America, the nonprofit hunger relief organization. Federal programs like the following work to alleviate hunger among seniors:

  • Supplemental Nutrition Assistance Program (SNAP or “food stamps”). SNAP benefits help income-eligible families and individuals buy groceries, snacks and non-alcoholic beverages. Participants use an Electronic Benefit Transfer card when paying for qualifying purchases. If you are 60 or older and can’t buy and prepare your own meals because of a permanent disability, you (and a spouse) may be able to become a separate SNAP household even if you live with others. Apply through your state, which sets rules for eligibility.
  • Commodity Supplemental Food Program. This federal program’s aim is to improve nutrition for people 60 and older. The United State Department of Agriculture distributes food and money to participating states and tribal organizations for running the Commodity Supplemental Food Program locally. To take part, apply with a local agency.
  • Seniors’ Farmers Market Nutrition Program. Seniors get help accessing fresh, local fruits and vegetables from farmers markets and roadside stands. Click your state on this map (all but Idaho, Colorado, Wyoming, South Dakota and U.S. territories participate) to find a local agency where you can apply.

10. Getting out of jury duty (in many places)

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Jury duty costs time and commute money, and reimbursement (which is taxable income) tends to be skimpy. Thus, while many seniors find the jury experience fascinating and enlightening, it is a financial burden for some.

Whether you can decline jury duty due to age depends on the rules in your state, explains ElderLawAnswers, a website run by a team of experts in elder legal matters.

Most states, the site says, let people opt out based on their age. The rules vary by state and by court. A few examples: The exemption is age 65 in Mississippi and South Carolina but 80 in Hawaii, Maine and South Dakota.

Learn the rules by contacting your local, district or federal courts or just wait to be summoned for jury duty and inquire then.

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