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Still Working over Age 70 1/2?Posted by SEP-SOLO-IRA-401k-ROTH on: 2007-04-18 15:45:57 in category:
Retirement Planning News [ Print | Permalink / 0 Comment(s) ] Paul D. McDonald, MBA Who is Still Working Over 70 ½? A lot more people than you think! Farmers, business executives, business owners, pastors and clergy, doctors, veterinarians, salespeople... the list is endless! Sure, some people and professions have a tradition of retiring at age 65 or sometimes even earlier, but that's not true for everyone. There are many active seniors who enjoy their work and want to keep doing it as long as they can. There are four basic categories of senior workers: 1) Those who continue to work full-time because they enjoy their work 2) Those who continue to work part-time because they want to remain active 3) Those who continue to work full time because the feel they have to 4) Those who continue to work part time because they feel they have to. I know the financial press has been trying to scare people into thinking that most seniors who still work are doing so because they have to, but in my experience that just isn't the case for the majority of working seniors. Most working seniors today are still working because they want to, not because they have to. If you talk to seniors who still are active in the marketplace today, they will cite many benefits from continuing to work, including the extra income and the possibility of health insurance and other work-related benefits. But the primary benefits that most seniors give for continuing to work is that it allows them to remain active, energetic, fulfilled, and to be around people. Either way, there are some special considerations for workers over the age of 70 ½, especially when it comes to retirement plans. Retirement Options for Workers Over age 70 ½ After you turn 70½ the IRS specifies that you must begin taking Minimum Required Distributions (MRD) from your traditional IRAs. But what if you are still working or have other types of retirement accounts? Will you have to start removing money and paying more taxes? Anyone who is over the age of 70½ is required to initiate the liquidation of their IRA, SEP-IRA, and Simple-IRA, regardless of employment status. Roth IRAs, on the other hand, are exempt from this rule and do not have any distribution requirement. The regulations on qualified retirement plans, though, are somewhat more involved. Qualified plans are those offered through an employer. These can include 401(k)s, 403(b)s, profit sharing, and Keogh plans. If you are an employee participant in such a plan and over the age of 70½, you can delay the MRD until April 1 of the calendar year after you retire. That is as long as you do not own 5% or more of the business. And there could possibly be more good news for employed seniors who also own IRAs. The government allows rollovers from IRAs to most employer-sponsored qualified plans. This means that if you are required to take MRD from your IRA and still work, you might be able to roll your account into your employer's plan. Then you could temporarily avoid taking distributions and paying the associated income tax. Even though qualified plans are allowed to accept money from IRA rollovers, they are not required to. Therefore, you should check with your employer's benefit department before you undertake this tax-savings strategy. About the author: Paul D. McDonald, MBA is a financial professional specializing in working with business owners and seniors. He assists people in making decisions on retirement planning, investing, business planning, key person insurance, executive bonus plans, and many other critical financial decisions. Paul completed a Master of Business Administration (MBA) at Keller Graduate School of Management in Chicago. He also holds a Bachelor of Arts (BA |
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