the pivotal age for retirees

Why 70 Is the Pivotal Age for Retirement Planning

For retirees, everything changes when they must begin tapping their tax-deferred retirement accounts, says retirement expert Ed Slott.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. The first baby boomer turned 70 in early 2016. Joining me to discuss why age 70 is such a pivotal age for retirement planning is retirement expert Ed Slott.

Ed, thank you so much for being here.

Ed Slott: Great to be back here live in Chicago.

Benz: It's great to have you here in the studio. Let's talk about age 70. A lot of people focus on age 65. That's maybe the year when they plan to retire, but a lot of important financial-planning considerations hinge around age 70. Let's talk about what changes for retirees at that age.

Slott: Well, everything changes because of the tax code. As most people know, that's the change part where you move away from accumulating money. Remember, you spend 30, 40, or 50 years working, saving, and investing in an IRA or a 401(k), and the money in these tax-deferred accounts hasn't been taxed yet. But it can't sit there forever. So, the government, years ago, decided, "Let's make it age 70 1/2" for some crazy reason--and nobody knows why. That's the date when they finally tell people, "We're sick and tired of waiting for you to drop dead--we want our money back."


Now, you have to go in a different direction. Instead of saving and saving and saving, now they want you to start taking this money out--whether you need it or not. The government is going to force you to take that money out, pay tax on it, increase your tax rate, increase your liability--even if you don't need the money. And you have to do this for the rest of your life or until your IRA or 401(k) runs out. They're called required minimum distributions.