THE MAGIC AGE OF 59 1/2 FOR THE WORKING MAN

You've spent decades working, raising a family, and building your retirement. At 59½, you may have more options for your hard-earned money than you realize.

Wait... What's So Magical About 59 1/2?

You've spent the last 30 or 40 years working, paying bills, raising a family, and hopefully putting a little something away for retirement. Maybe you've been contributing to your employer's 401(k) for decades. Maybe you've changed jobs a few times and have retirement accounts scattered all over the place. Either way, you've worked hard for what you've managed to accumulate.

And now you're getting close to 60, still working, and suddenly retirement doesn't seem quite so far away anymore. It's getting real. Maybe you're starting to wonder whether you've saved enough, how much longer you'll need to work, or whether you'll actually be able to enjoy the retirement you've spent all these years preparing for.

But here's something you might not know. Turning 59 1/2 can open up financial options you didn't even realize you had.

And no, I'm not suggesting you retire tomorrow, cash out your 401(k), buy an RV, and disappear into the sunset. Although, if that's your plan, good for you!

I'm talking about something much more practical. Understanding what you've spent decades building, what options may now be available, and whether your money is positioned to do what YOU actually want it to do.

Because there's a difference between having retirement savings and having a retirement plan.

So What's the Big Deal About Turning 59 1/2?

For years, you've probably heard that you're not supposed to touch your retirement accounts before age 59 1/2. There's a reason for that. Withdrawals from most retirement accounts before that age can trigger an additional 10% federal tax penalty, on top of whatever ordinary income taxes you might owe. But once you turn 59 1/2, that additional early-withdrawal penalty generally goes away.

So why am I making such a big deal out of this birthday?

Because 59 1/2 isn't just about taking money OUT of retirement accounts. Depending on your employer's plan, it may also be the age when you can begin exploring different ways to position some of the money you've already saved, even if you have absolutely no intention of retiring yet.

And this is where things start to get interesting.

Wait... I Can Do Something With My 401(k) Without Quitting My Job?

Possibly! And this is something I wish more working people knew to ask about.

Some employer-sponsored 401(k) plans allow what's called an in-service distribution once you reach age 59 1/2. Sounds complicated, doesn't it? It's really just a fancy way of saying your retirement plan may allow you access to move some of the money you've already accumulated while you're still employed.

Imagine you've been working for the same company for 25 years. You've faithfully contributed to your 401(k), collected the employer match, watched your balance grow. You plan to keep working another five or seven years, so naturally, you assume your money has to stay right where it is until you retire.

But what if it doesn't?

Depending on your employer's retirement plan, you may be able to move an eligible portion of those funds into another retirement arrangement without leaving your job. When handled through a qualifying rollover, the money can generally retain its tax-deferred status rather than creating an immediate income-tax bill.

And no, that doesn't necessarily mean you have to stop contributing to your workplace plan or give up your employer match. You're exploring what may be available outside your employer's plan and options that could provide for lifetime income.

Of course, not every employer offers this option, and the rules can vary. But think about this for a moment. You could have been contributing to the same retirement account for decades and never realized there was anything to ask about beyond your balance and investment selections.

When is the last time you actually looked at what your retirement plan allows or offers rather than just checking how much money is in it?

You've Spent Decades Growing Your Money. What About Protecting It?

Let's give workplace retirement plans some credit. Many 401(k)s offer target-date retirement funds designed to become more conservative as you approach retirement. Generally, that means gradually reducing stock exposure and increasing allocations to investments such as bonds. The idea is to reduce some of the risk as the day you'll need your money gets closer.

Makes sense, right? After spending 30 or 40 years building your retirement savings, the last thing most people want is to watch a significant portion disappear just as they're getting ready to use it.

But here's the part worth talking about. When you start shifting toward more conservative investments, you may be reducing your exposure to stock market volatility, but you're also potentially reducing your opportunity for growth. And those bonds? They're not completely immune to losses either. Interest-rate changes can affect bond values, something plenty of investors have learned the hard way.

So now you've got an interesting situation. You're getting closer to retirement, you want to protect what you've accumulated, but you don't necessarily want your money to stop growing.

What if those two goals didn't have to work against each other?

This is one of the reasons I like introducing people to fixed indexed annuities. They offer a different way of approaching retirement savings by protecting principal and allowing for indexed growth.

Now, does that mean every fixed indexed annuity is going to earn the same interest every year? Of course not. Different products have different crediting opportunities and features. But the point is that protecting money doesn't necessarily mean giving up the opportunity to grow it.

I don't believe everybody should be handed the same financial strategy simply because they're approaching the same birthday.

Aren't Annuities Just for Retired People?

Not even close! And I think this is where a lot of the confusion begins.

You don't have to be retired to purchase an annuity. You don't even need to be 59 1/2. Someone who's 35 and received a substantial inheritance might want to protect a portion of that money while giving it an opportunity to accumulate for the future. Someone who's 50 might be looking for a way to diversify how they're preparing for retirement. And someone who's 65 might be more interested in creating a reliable income stream they can't outlive.

Same general category of products, three completely different reasons for considering them.

And before somebody rolls their eyes because their neighbor, uncle, or financial advisor told them annuities are terrible, let me ask you something. Have you actually looked at one recently, or are you repeating something somebody told you?

I'm not saying every annuity is wonderful. I've seen some pretty bad annuities over the years, too. But here's something I find interesting. People have watched the stock market lose enormous amounts of money, sometimes waiting years for their investments to recover, and yet nobody seems to struggle to suggest we should abandon the stock market altogether. But annuities? One bad experience from somebody's uncle 15 years ago, and suddenly they're all terrible. Just sayin'.

Today's fixed and fixed indexed annuities can offer a variety of features, including interest-crediting opportunities, premium bonuses, withdraw provisions, and optional lifetime income benefits. Some can even be structured to provide income for two lifetimes, which we'll get to in a minute.

And while we're clearing up misconceptions, let's address another one. No, purchasing an annuity doesn't automatically mean your money is locked away in some mysterious vault that nobody can open until you're 90. Many products allow annual penalty-free withdrawals, and some offer additional access provisions for certain circumstances. How much you can access and whether charges apply depends on the contract.

What If I've got $500,000 Sitting in the Bank?

First of all, congratulations! Accumulating that kind of money takes work, discipline, or perhaps a combination of good decisions and good fortune.

But let me ask you something. What is that money supposed to DO?

If you've got $500,000 sitting in a bank account because you're afraid of losing it in the market, I completely understand where you're coming from. I'm not particularly interested in watching my hard-earned money disappear during a market crash either. In fact, that's one of the reasons I fell i love with what I do. I like protecting my money. I like knowing it's there. And I especially like finding ways to give it opportunities to grow without exposing it to stock market losses.

I know I'm not the only person that feels this way!

But let's think about this. Do you really need all $500,000 available tomorrow? Is that your emergency fund, your retirement savings, money you're planning to leave your children, or some combination of all three?

Could a portion potentially be positioned to earn more interest? Could some if it eventually provide income during retirement? Would it make sense to look at strategies that offer principal protection along with opportunities for accumulation?

And yes, I understand the appeal of a high-yield savings account. I like having money available when I need it too. But, have you done the math, like actually done the math against inflation? Also, bank savings rates can change, and the interest you're earning today may not be what you're earning a year from now.

There are also differences between bank deposits and annutities, including how they're protected, how interest is earned, tax timing, and when money can be accessed. Those differences matter when you're deciding what belongs where.

Keeping money safe and making money work toward a purpose aren't necessarily the same thing.

And What About Your Spouse? Does Your Retirement Plan Work for Both of You?

This is another question I think more married couples need to ask, especially as retirement gets closer.

You've spent decades preparing to retire together. Maybe you've got two Social Security checks coming in, a pension, and money saved in retirement accounts. You've figured out what your monthly income should look like, and everything seems pretty comfortable.

But what happens when the first spouse dies?

I know. Nobody particularly enjoys that conversation. But it's a big problem and unless you've both discovered the secret to living forever, it's something worth talking about.

When one spouse passes away, the household generally goes from receiving two Social Security checks to one survivor benefit check. The surviving spouse may receive a higher benefit than their previous one, but it typically won't match what both were.

But here's the part I don't think we talk about enough. The mortgage doesn't suddenly get cut in half. Neither do the property taxes, homeowners insurance, or electric bill.

What about the pension? Does it continue paying the surviving spouse? At the same amount? Half the amount? Nothing at all? The answer depends on the pension and the benefit option selected.

And your retirement accounts? Yes, a surviving spouse may inherit those assets, but inheriting a retirement account and having a dependable monthly income are two very different things.

This is where joint lifetime income options become particularly interesting. Income could be generated for as long as either spouse is alive. And it's important to mention that these are guaranteed lifetime income. Because at the end of the day, none of us know how long we will live.

And remember, having money and having access to it aren't always the same thing. Retirement accounts, life insurance claims, and other inherited assets may involve paperwork and processing time before a payout is initiated after death. Assets that need to pass through probate can take considerably longer.

With a properly structured joint lifetime income annuity already providing income, the surviving spouse continues receiving payments without having to wait for probate to finish. And no, that will doesn't automatically protect from probate.

But My Neighbor Says...

OMG. This or a version of this...heard them all. I pick and choose my battles.

Maybe your neighbor is doing wonderfully financially. Maybe they have two pensions, a paid-off house, no debt, and enough money to travel six months out of the year. Good for them!

But do YOU have those same circumstances?

Maybe you're still carrying a mortgage. Maybe your spouse doesn't have much of a retirement account. Maybe you're helping support aging parents or an adult child. Or maybe you've accumulated a substantial amount of money but are absolutely terrified of losing it because you remember wiat previous market crashes felt like.

Two people can be the same age, make the same salary, and have nearly identical retirement account balances while needing completely different approaches to their money. And just because you play golf together, work for the same company, or belong to the same social circle doesn't mean your finances should look alike.

I always find it very interesting how comfortable people can be taking financial advice from someone simply because they know them. Your neighbor might be a wonderful person. They might even be doing exceptionally well with their own investments. But that doesn't automatically mean what works for them makes sense for you.

And the same goes for advice you've heard about annuities, life insurance, pensions, or practically anything else involving money.

So before you decide if something is good or bad for your situation, wouldn't it make sense to understand how it works and what it's actually designed to accomplish? Your neighbor's retirement isn't your retirement. And your money doesn't have to follow the same path as everybody else's.

So What Should You Actually Be Thinking About at 59 1/2?

This is a great age to start looking at the bigger picture and questioning what you what your money to do and how long it's realistically going to last.

For example, do you know whether your employer's retirement plan allows for in-service distributions? Have you reviewed your retirement accounts you may have left behind with former employers? Do you understand how your current 401(k) investments are positioned as you approach retirement, and are you comfortable with the amount of market exposure you're carrying? Does that employer life insurance plan go with you?

And what happens when it's finally time to stop working?

Where will your monthly income come from? How much will Social Security provide? Do you have a pension? How much will you need to withdraw from your retirement accounts annually? What does that do to taxes? Inflation? And if you're married, will that income still be there for the surviving spouse?

Maybe you're perfectly happy with the way everything is currently structured. Great! There's no need to change something simply for the sake of changing it. But there's also no reason to assume you don't have other options just because nobody has ever explained them to you.

And that brings me to one of my favorite questions...

When is the last time somebody explained what was available to you instead of simply telling you only what they have to offer?

The Real Magic Isn't Turning 59 1/2

It's realizing you might have more choices than you thought.

You've spent years working for your money, paying your bills, making sacrifices, and hopefully putting something away for a future when you won't have to work quite so hard.

And while 59 1/2 isn't some magical age when every financial door suddenly opens, it is an important milestone. For some working people, it's the beginning of an opportunity to look a their retirement savings differently, explore options they may not have had before, and start thinking about how those savings will eventually become income.

You don't need to understand every financial term to have that conversation. You don't need to be wealthy. And you certainly shouldn't feel embarrassed because nobody ever told you what questions to ask. But you should know enough to make informed decisions about money you've worked decades to accumulate. Not what your co-worker is doing. Now what your neighbor thinks you should do. And not simply what somebody else has always told you.

What makes sense for YOU?

Because no two people are alike. And neither is their money.