There are seven key milestone that can significantly impact your retirement plans. Each milestone is related to a specific age and keeping on track means being able to make the most out of your income, allows you to lower your taxes, and helps to avoid certain penalties that can slow your progress. Paying attention to these milestones means getting the most out of your retirement.
50 Years Old:
Let’s face it, not everyone was financially savvy when they entered the workforce. In your early 20s (maybe even 30s), you might have felt that you were going to live forever and the thought of retirement was something that never crossed your mind. If that’s true for you, 50 is a magical number. Once you turn 50, employers who offer 401(k)s or other sponsored retirement plans are allowed to let you make “catch-up” contributions to your account. The Internal Revenue Service (IRS) allows for these contributions and adjusts the limits annually. Currently, in 2021, you’re allowed to contribute $6,500 over the annual limit of $19,500 in your retirement plan that is employer sponsored.
59 1/2 Years Old:
Prior to turning 59½ there’s a 10% federal penalty for early withdrawal from employer sponsored retirement plans. However, you might still be on the hook for regular income tax on the distribution. Even though there’s no longer a penalty at this age, it’s still best to leave your retirement account alone. The longer you can go without touching the money, the more you’ll have when you really need it - during retirement when you no longer have a paycheck coming in.
62 Years Old:
As soon as you turn 62 you’re eligible to start receiving Social Security benefits. The earlier you choose to start getting this money, the less it is. Choosing to receive it at 62 may mean you’ll get less, but sometimes there are good reasons to get it as soon as you can. No one can make this decision but you. If you choose to wait to draw your Social Security benefits, the amount you get goes up each year until you turn 70. For more information on Social Security benefits, check out www.ssa.gov/planners. There you’ll also be able get links to learn more and figure out the best time for you to draw based on your situation.
65 Years Old:
Anyone already receiving Social Security benefits is automatically enrolled in Medicare Part A and Part B. For those not yet receiving benefits, there is an annual enrollment period each year. Even if you’re eligible for Medicare at 65, that doesn’t mean you have to start drawing your monthly benefit check. The enrollment period starts three months before the month you turn 65 and lasts for seven months. It’s important to enroll as soon as you can, because if you don’t, there are often penalties that will last the rest of your life, such as higher premiums. At www.medicare.gov you can sign up for alerts and updates and get more in-depth information.
67 Years Old:
Full retirement age for Social Security means you’re able to receive full or unreduced benefits. This age is determined by when you were born. For those born between 1943 and 1954, the full age for retirement is 66. For those born after 1954, full age retirement increases two months each year until the maximum age of 67, which is the same for anyone born 1960 or later.
70 Years Old:
If you decide to wait until you turn 70 to draw your monthly Social Security, you’ll be getting the most money available to you. This amount can be considerably larger than if you had decided to take it earlier. While you can wait past 70 to draw, the amount will no longer be increasing and the Social Security Administration will only make retroactive payments for a total of six months.
72 Years Old:
Even if you don’t need to start drawing funds from your employer sponsored retirement plans, Uncle Sam says you have to once you reach this age. This is called Required Minimum Distribution (RMD) and the number is based on your age and the value of your retirement plan. There can be high penalties if you fail to take the RMD. By having a plan in place to address making the most out of your retirement plan, it’s important to have the right distribution strategy planned out ahead of time. Consulting with a tax advisor or financial planner can ensure you’re on the right path and not paying any penalties.¹
For more informational on Social Security, contact one of our trusted Financial Advisors who can guide you through the process.
¹RMDs can be delayed if currently working for the employer. In the case of IRAs or former employer plans, all RMDs must still be taken.