Retirement expert discusses retirement fitness, timing RMDs and making the most of health savings accounts
Is there a biggest mistake that people make when approaching retirement?
This question, or some variation on it, pops up regularly. Yes, many people in their 50s and beyond are making a serious mistake—and it has nothing to do with money.
Simply put, the majority of pre-retirees are focused solely on their financial health. Far too few are giving any thought to their physical health. And good physical health is crucial to making the most of later life.
Put another way: A big nest egg isn’t going to do you much good if you can’t get off the couch.
To be specific: Only 42% of Americans ages 65 to 74—and only 28% of those 75 and older—meet government recommendations for aerobic activity, according to the Centers for Disease Control and Prevention and the National Center for Health Statistics. Worse, only 14% of the first group and just 8% of the second also do the suggested amount of strength training. (Be honest: Did you even know there are recommendations for strength training in later life?)
Exercise isn’t just a good idea; it is critical to your well being, particularly as you age. A recent editorial in the Annals of Internal Medicine sums it up nicely: “People who engage in physical activity have a lower risk for cardiovascular disease, diabetes, some types of cancer, depression, cognitive impairment and functional decline.”
If you spend at least 150 minutes each week on moderate-intensity aerobic activity and do some type of muscle-strengthening activities two or more days a week—congratulations. If not, start with the CDC’s Physical Activity pages. It is the single-most-important step you can take as you approach retirement.
I will turn 70 in June 2017. I want to take my first required minimum distribution from my IRA in the year I turn age 70. When is the earliest I can take the distribution and have it count as an RMD? Do I have to wait until after my June birthday, or can I take it as early as Jan. 2, 2017?
First, let’s clear up an important point: You must begin withdrawals from your IRA after you turn 70½—not 70.
In this case, you will turn 70½ in December 2017. That means you have until April 1, 2018, (your “required beginning date”) to take your first required minimum distribution from your account. (A person’s first RMD must be made by April 1 of the year after he or she reaches 70½.) But you certainly can act sooner than that, says Ed Slott, an IRA specialist in Rockville Centre, N.Y.
The year in which a person turns 70½ is his or her first “distribution year.” The first funds withdrawn from an IRA in a distribution year are automatically deemed (in the eyes of the Internal Revenue Service) to go toward satisfying a person’s RMD for that year, Mr. Slott notes.
So…as your question indicates, you can withdraw funds from your IRA as early as Jan. 2, 2017—well before you turn 70½—and that withdrawal will go toward meeting your first RMD.
I opened a health savings account for my family of three in 1997. I am 61 this year, my spouse is 55; our child is 21. My questions are mostly about what happens to the account when I become eligible for Medicare.
Will the original HSA remain in my name? Will all the funds in the account be eligible only for paying medical expenses until my spouse reaches age 65 and our college student either reaches age 26 or gets other coverage? Will the two of them be able to continue using the account for medical expenses until then?
Almost 20 million Americans are enrolled in health savings accounts, according to America’s Health Insurance Plans, a Washington, D.C.-based trade association, and many account holders will be dealing with these questions in the coming years.
To start, the original HSA will remain in your name. After you enroll in Medicare (typically, at age 65), you won’t be able to make contributions to the account, but you will still be eligible to keep the account. As for using your HSA, account holders may always tap their HSA funds to pay qualified medical expenses for themselves, their spouse or their dependents tax-free, regardless of whether they are eligible to contribute to an HSA, says Paul Verberne, a principal at HSA Consulting Services in Houston. Indeed, you can use the account to pay such bills regardless of your age.
That said, it is important to note, Mr. Verberne adds, that the rules involving dependent children differ for health plans and health savings accounts. The Affordable Care Act requires insurers to make coverage available until a child reaches age 26. Eligibility to use HSA funds is more limited: The child must be under 19 years of age, or under 24 if a student. The child also must have the same principal residence as the account holder for more than half the year and must not provide more than half of his or her own support.
Finally, once you turn 65, funds in the HSA may still be used to pay medical expenses tax-free for the account holder, spouse and qualified dependents. They also may now be used for anything else, much like an IRA. If not used for qualified medical expenses, the funds withdrawn are taxed as regular income.
Mr. Ruffenach is a former reporter and editor for The Wall Street Journal and co-author of “The Wall Street Journal Complete Retirement Guidebook.” His column examines financial issues for those thinking about, planning and living their retirement. We welcome your questions and comments at moc.j1601335716sw@er1601335716ocnek1601335716sa1601335716.