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The significance of 59 1/2
Old 07-04-2008, 07:21 PM   #1
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The significance of 59 1/2

59 1/2 is when you can start taking distributions on retirement accounts, but does it hold any other form of significance?

My parents are approaching this age and was curious about any advice I could pass on to them, they are 59 and 58, one will be working until they are 62 and the other until 65 in order to hit their retirement goals.

On a side note, it is fairly awkward talking with them about retirement when my own goal is to retire early sometime near 40, at least if my numbers actually do match up to my predictions.
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Old 07-04-2008, 07:25 PM   #2
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will you at least wait till they have retired? awfully awkward to retire before they do.
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Old 07-04-2008, 08:25 PM   #3
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Luckily I don't have to worry about that, I am 24, they would have to wait until they were in their late 70's, at least, in order to retire at the same time or after me.
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Old 07-04-2008, 10:40 PM   #4
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will you at least wait till they have retired? awfully awkward to retire before they do.
I have a friend that owned his own company and absolutely loved what he did, but he finally decided to retire about 2 years ago...at age 80. One of his sons retired about 1 year before that, but had decided to not tell his dad until after dad retired. One day the son decided to come for a visit, and his dad was a bit perplexed about it since it was in the middle of the school year, and the son was a teacher. Dad asked how he managed to get off work from the school at that time of year. OOPS! Son forgot about that, and the cat was outta the bag. The son had retired, but dear old dad was still plugging away!

Although the dad is happily retired, he still goes in occasionally to work for his youngest son who took over his business when he retired.
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Old 07-05-2008, 06:16 AM   #5
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will you at least wait till they have retired? awfully awkward to retire before they do.
I don't find the question to be premature. My husband and I are both working and both of us have passed this 59 1/2 thing. I am weighing the options that we have, especially when he retires next year. For example, should we convert part of his deferred to Roth if our cash-flow makes it harder to continue to contribute to his Roth? Should we convert some to taxable as we can do this more slowly than the age 70 1/2 dump? Is it better in the long run to take a little tax to reduce future tax rate risk in the far future? My problem is that I am not so good with tax estimates. For example, I want to sell my oil stocks and can't figure out what impact on AMT kick-in that this might have. I really do want to enjoy the 15% capital gains rate.

If plex is better than I am at figuring out the pros and cons, I think it would be worthwhile to investigate a few things prior to retirement date.
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Old 07-05-2008, 07:58 AM   #6
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For example, I want to sell my oil stocks and can't figure out what impact on AMT kick-in that this might have. I really do want to enjoy the 15% capital gains rate.
Try the tax calculator here Tax Calculator - Tax Tools and Calculators - H&R Block

(assumption, of course, that rates, etc. are like 2007 which they may/may not be in the future)
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Old 07-05-2008, 08:51 AM   #7
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For example, should we convert part of his deferred to Roth if our cash-flow makes it harder to continue to contribute to his Roth? Should we convert some to taxable as we can do this more slowly than the age 70 1/2 dump? Is it better in the long run to take a little tax to reduce future tax rate risk in the far future? My problem is that I am not so good with tax estimates. For example, I want to sell my oil stocks and can't figure out what impact on AMT kick-in that this might have. I really do want to enjoy the 15% capital gains rate.
Without knowing all your specifics, a Roth conversion is usually a good idea if it can be done in the 15% bracket or lower. And if you have reason to believe AMTs will kick you into much higher brackets, then even at the 25% level it can make sense in some situations.

As for capital gains and taxable accounts, I have little faith that LTCG rates will remain at 15%. I suspect they will be raised in the next few years. I don't expect to see a reversion to taxation as ordinary income, but I would expect to see a cap in the 20-25% range instead of 15%. But what do I know...?
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Old 07-05-2008, 12:30 PM   #8
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It isn't financial, but I'd suggest encouraging your parents to get medically checked up. Things to consider would be colonoscopies, mammograms, and prostate exams. Their doctor could of course give them a full list.

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Old 07-05-2008, 05:45 PM   #9
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59 1/2 is when you can start taking distributions on retirement accounts, but does it hold any other form of significance?
Actually, you can start taking distributions from retirement accounts at any age. Also, you can take them without penalty if you take them in Substantially Equal Periodic Payments for at least 5 years.
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