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Pre-retirees & retirees
Whether you’re already retired or looking forward to it in the next few years, you probably know how specific ages can trigger the retirement decisions you make. For example, Medicare begins at age 65. And it seems the closer you get to retirement, the faster those age-related events come. Here’s a look at important ages and the retirement rules they set in motion. Knowing about them might help you with your retirement planning.
Age 50
Turning the big 5-0 can be a wake-up call. One minute you’re cruising along in your 40s, the next minute you’re receiving membership invitations from senior citizen organizations. From a retirement prep standpoint, the IRS also has an invitation. To catch up on retirement savings goals, employees aged 50 can contribute an additional $6,000 — for a total of $24,000 — to their 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan in 2018. People 50 and older can also kick in an additional $1,000 — for a total of $6,500 — to their IRA or Roth IRA. Before you increase your contributions, check with your employer’s human resource department, financial advisor and tax advisor. There might be some restrictions based on a retirement plan you may have at work, the type of plan it is, and your total income that could limit how much (or how tax-deductible) those contributions can be.
Age 55
People with 401(k)s or federal Thrift Savings Plans who leave their employer after turning age 55 might be able to take withdrawals from the retirement account connected with the job they most recently left, without having to pay the 10 percent early withdrawal penalty. Review your plan document, and check with your former or current employer’s human resource department and your tax advisor to find out if this plan feature exists, and if it might be something to consider for your financial circumstances.
Age 59 ½
59 ½ is the first age at which you can take withdrawals from your IRA and other retirement accounts without having to pay a 10 percent early withdrawal penalty. Exceptions exist, however. You might not be able to withdraw from a 401(k) if you still work for the employer that offers it. And if you have an IRA CD, you could be penalized for taking funds out before the CD matures.
Age 62
This is the first age at which you can begin receiving Social Security benefits, but you’ll receive a larger benefit if you wait until your full retirement age (FRA) to apply for benefits. FRAs range from age 65 to 67, depending on the year in which you were born. You can receive an even larger benefit if you wait until age 70 to start collecting Social Security. Your annual cost-of living adjustment (COLA) is also based on your benefit, so if you start taking Social Security at 62 with reduced benefits, your COLA will be lower, too. Before making this important, one-time decision, read up on Social Security rules and consult your trusted Retirement Rocket Scientist.
Age 65
This is when Medicare begins, and most Americans should enroll when they become eligible (three months before their 65th birthday). To learn more about how Medicare eligibility works with your existing health insurance if you’re still working, be sure to talk with your organization’s benefits manager or a representative in your human resources department.
Ages 70 and 73
If you haven’t begun receiving Social Security benefits, you must do so at 70. The other milestone this year occurs at age 73. At this age, “required minimum distributions” kick in, and you must begin taking distributions from your IRAs and previous employer 401(k)s. Check with your Retirement Rocket Scientist, as there are steep penalties for not following required minimum distribution rules.
At Every Age
At every stage of your life, it’s important to make sure you have a financial plan, and that it’s keeping pace with your life. Your trusted Retirement Rocket Scientist can help you make the best choices for you and your family as the years pass and your circumstances and priorities change.