What do you think of when you hear the phrase “milestone birthday?” You might remember younger days, when you were eager to be eligible for a driver's license or to buy a drink. Or you might think of those birthdays ending in a zero, when your friends throw you a party with black balloons and gag gifts, joking that you're over the hill.
There's another type of milestone birthday you may not have thought about—the financial milestone. Scattered throughout your life, these milestones can make a difference to your financial well-being, and that of your family. Knowing where financial milestones are located, and how to plan for them, can make your journey a lot smoother.
You've been deeply involved in your child's healthcare for his entire life, from birth, through skinned knees and stomach bugs, and even a trip or two to the ER. Through it all, you were able to communicate freely with your child's health care providers, and they with you. Now, suddenly, your child is eighteen, and legally an adult. His doctor is forbidden from disclosing private medical information to you by privacy laws, specifically the federal Health Insurance Portability and Accountability Act, better known as HIPAA.
Also, as an adult, your child must take the difficult step of considering who would make medical decisions for him in the event he is unable to, such as if he were unconscious after a serious car accident.
The take-away: Encourage your child to sign a HIPAA Authorization form when he or she turns 18 and keep it on file with his medical providers if he wants them to be able to release information to you. Also, your now-adult child should put a medical power of attorney in place giving you or some other trusted person the ability to make medical decisions for them in case of an emergency in which he becomes incapacitated.
The Credit Card Act of 2009 prohibits credit card companies from issuing cards to those under age 21 unless they have a co-signer over age 21, or can prove that they are capable of repaying the debt themselves. At 21, the wide world of credit is available to anyone who qualifies.
The take-away: Have “the talk” with your kids before they turn 21. No, not that talk...the one about responsible credit use, interest, on-time payments. and paying your balance in full each month if possible.
Around age 25, car insurance premiums may go down because, statistically, teen drivers and those in their early twenties have higher accident rates. Of course, insurance premiums are based on a number of factors, including claims history, location where the vehicle is kept, and type of vehicle. Still, you may see benefits based on several years of experience driving and a clean driving record.
The take-away: If the youngest driver on your policy turns 25, contact your insurer to ask about a rate reduction based on this fact, especially if the driver in question has a good driving record. Your insurer may be willing to offer a discount, but might not do so unless you ask for it.
Thanks to the Affordable Care Act, your child can keep his or her status as a dependent for purposes of remaining on your health insurance plan until the age of 26, typically in the month of their birthday. If your plan is through an employer, check carefully to find out the exact date your child's benefits terminate.
The take-away: A few months before you know your child's coverage will be coming to an end, help him or her review and put in place other options for coverage.
By age 50, you've probably at least begun thinking about retirement, and maybe worrying that you haven't saved enough. Good news: starting at age 50, you might be able to increase contributions to your IRA or to a retirement plan sponsored by your employer. These “catch-up” contributions should allow you to build your nest egg if you didn't start as early, or contribute as much, as you should have.
Age 50 is also a good time to look seriously into long-term care insurance. It may be hard to imagine a time when you would need nursing home care, but for many people, accidents or unexpected illness hasten that day. Even if you remain in good health for many years, the cost of long-term care is high and steadily rising.
The take-away: If you're looking to contribute to your employer's plan, check the plan rules first. Not all permit “catch-up” contributions. Also, begin looking into long-term care insurance. If you can afford to put it in place now, your rates will be better and you'll have peace in mind in case it's needed sooner than you expect.
You may be able to begin collecting Social Security retirement benefits as early as age 62, rather than waiting until your full retirement age (currently 66 or 67 depending on the year in which you were born). There's a catch, however: if you elect to begin receiving benefits early, the amount you receive monthly will be reduced by as much as 30% from what you would have gotten if you waited.
The take-away: Early retirement may sound great, but talk with your financial planner to see if you can really afford the reduction in monthly Social Security retirement payments before you elect to begin receiving payments at age 62.
Even if you choose to begin receiving Social Security retirement payments at age 62, you won't typically be eligible for Medicare until age 65 (people with some conditions or disabilities may be eligible sooner). If you are already receiving Social Security benefits, you'll be enrolled automatically when you turn 65. If not, you can enroll on your own when you meet eligibility requirements.
The take-away: If you are enrolling in Medicare on your own, know your enrollment period (the month of your 65th birthday, and the three months before and after) to avoid unnecessary costs and fees. For someone born in June, enrollment would be from March through September. Those already enrolled who wish to change their plan can do so during open enrollment. Even if you're generally satisfied, there are a number of things you should review during open enrollment.
Interested in learning more about any of these milestones and how you can prepare for them? Contact us to schedule a free initial consultation.