“Now they have to start spending what they accumulated and the big scare is that they will not have enough money for the rest of their lives,” Jordan says. “Depending on their health, they may want to continue working.”
Jordan says Bryn Mawr sometimes advises clients to start taking distributions from tax-deferred accounts gradually before they turn 70.5 so they are not pushed into a higher tax bracket when they begin required withdrawals.
Advisors also need to remind clients that Social Security benefits can be taxed. For an individual, 50 percent of Social Security benefit is subject to federal income tax if the income is above $25,000 and 85 percent is taxed if the income exceeds $34,000, according to the Social Security Administration. The limits for couples are $32,000 and $44,000, respectively.
This year presents another deadline as well, advisors are reminding their clients. The Social Security Administration is phasing out the strategy known as file and suspend. Under this strategy, one spouse is able to file and suspend his benefits to allow the other person to collect spousal benefits. This allows the first spouse’s benefits to grow until age 70.
The SSA has given couples until the end of April to file for this benefit, after which it will no longer be available.