Your age significantly affects how much money you’ll have during your retirement years, and different retirement benefits have different eligibility ages. Over the course of 23 years, from age 49 to 72, you’ll need a financial retirement plan that pays close attention to these age milestones so you don’t miss out on financial opportunities or be subject to penalties.
49: Max Out Retirement Accounts
If you began saving for retirement early in your career, you’re better poised to take advantage of compounding investment returns.
50: Make Catch-Up Contributions
Making catch-up contributions allows you to load your retirement accounts with additional money and qualify for a more significant tax deduction.i
55: 401(K) Withdrawals and the Rule of 55
If you reach the age of 55 while the current calendar year is ongoing and you quit your job or are separated from it, you become eligible to start withdrawing funds from your 401(k) without having to pay the penalty for early withdrawal.ii
59½: IRA and 401(K) Penalties End
The 10% early withdrawal penalty on IRA and 401(k) withdrawals ends at 59½; however, you’ll need to pay tax on the money put in and the associated growth earnings. iii
62: Eligible for Social Security Payments
If it’s part of your financial retirement plan, you can start collecting your Social Security payments at age 62. However, your monthly payments could be reduced by 30% if you begin payments before your full retirement age of 67.iv And that reduction is permanent!
65: Time to Consider Medicare Coverage
You have seven months to enroll in Medicare, and that window opens three months prior to the month you turn 65.v This birthday’s important because your Medicare Part B premiums will increase by 10% for each 12-month period you were eligible for benefits but didn’t enroll.vi
66 – 67: Social Security Full Retirement Age
If you were born between 1943 and 1954, you qualify for retirement at age 66. If your birthday is after 1959, you’ll have to wait one more year—until age 67. And no matter your age here, there’s a built-in benefit if you wait on those payments.
70: Boost your Monthly Social Security Payments
Social Security payments increase by a certain percentage for each month you wait to start your payments between your full retirement age and age 70.vii Plus, if you’re still working, the additional income could push you into a higher tax bracket. After age 70, there’s no additional benefit to waiting.viii
72: 401(K) and IRA Required Minimum Distributions
If you have money in a retirement plan such as a 401(k) or traditional IRA, your first distribution must be taken by April 1 of the year after you turn 72 (73 if you reach age 72 after December 31, 2022). The excise tax for missing a required minimum distribution is a stiff 50% of the amount that should’ve been taken. But the SECURE 2.0 Act drops the excise tax rate to 25%, and possibly 10% if the RMD is corrected within to years.ix
Whether you’re heading into this span of important birthdays or are already in the thick of it, it’s important to factor these milestone ages into your financial retirement plan. Reach out to our team today at (603) 261-3736 to ensure you’re prepared for each birthday!
Sources:
- [i] https://www.investopedia.com/401k-catch-up-contributions-5499024#:~:text=Understanding%20Catch%2DUp%20Contributions&text=If%20you%20are%20age%2050,the%20time%20you%20reach%20retirement.
- [ii] https://smartasset.com/retirement/401k-55-rule
- [iii] https://www.investopedia.com/ask/answers/101314/how-do-you-withdraw-money-your-401k.asp
- [iv] https://www.ssa.gov/pubs/EN-05-10035.pdf
- [v] https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start
- [vi] https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties#:~:text=Part%20B%20late%20enrollment%20penalty,B%2C%20but%20didn’t.
- [vii] https://www.ssa.gov/benefits/retirement/planner/delayret.html
- [viii] https://blog.ssa.gov/are-you-age-70-or-older-and-not-yet-getting-your-social-security-retirement-benefits/
- [ix] https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
Bob has a passion for making your money work hard for you. He takes profound joy in ironing out a plan for a long and comfortable retirement, no matter what your current income or level of wealth. With a work ethic second to none, he has a zeal for transforming uncertainty into stable ways for you to protect your future and your family. He knows that the quality of your life you enjoy today can remain as rewarding—or even better—after retirement.
With a strong background in information technology, Carol is instrumental in building operational policies and strategies that keep the organization functioning smoothly. Carol’s organizational skills and her flexibility to jump from priority to priority along with her commitment to customer service makes her an essential part of the Grimard Financial team. When Carol is not working with the Grimard Financial Family, she is a very creative and accomplished photographer.