Certain tax drawbacks are going to hit people working after age 50 in ways that their younger coworkers will not face.
Savings for retirement should start much earlier than age 50, U.S. News and World Report reminded
. Younger workers have the advantage of putting much of their retirement savings into Roth IRA plans and even Roth 401(k) plans, which will mature and be available as tax-free income at retirement.
People working after age 50 may not have had the advantage of starting one of those Roth IRA accounts and will have to face a tax bill on money saved that they will need to access at retirement. If this is your situation, it is a good idea to think about how you will pay for that tax bill when you are relying on retirement savings.
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People working after age 50 are more likely to have considered starting a long-term care insurance plan. Only a portion of your long-term care insurance is deductible. The American Association for Long-Term Care Insurance said
there are certain limits on what amount of premiums can be considered a medical expense deduction. The amount you can deduct is based on your age. At age 50 that amount is $1,360. At age 60, that amount goes up to $3,720. By age 70, the amount is $4,660. These amounts are subject to change.
If you are still working at age 70, do not forget to start drawing from your retirement plan. If you do not there is a huge drawback. According to U.S. News and World Report
, there will be a 50 percent penalty and income taxes for people who forget to start drawing on their account.
Forbes said the rules for taking money
out of a retirement account are sometimes confusing. Even people at age 59 ½ who do not anticipate a penalty for early withdrawal will face the potential of problems if they do not carefully consider the tax rules.
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