Posted by Judi Sanborn, CFP®, AIF®
When we are young there is always a birthday to look forward to, whether it’s getting a drivers license at 16 or being able to buy a drink at 21. But there comes a point where most people stop looking forward to the next birthday.
But if you are approaching retirement age, there are several birthdays at which certain benefits and entitlements kick in, giving you something to look forward to as you hit your golden years. Here are nine age milestones to mark on your calendar:
- You can make catch-up contributions to your 401k and/or your IRA. The catch-up contribution amount for a 401k is $6,000 and for an IRA $1,000.
- These catch-up contributions would be in addition to your regular contributions, which are $18,000 for a 401k and $5,500 for an IRA.
- Some 401k plans allow penalty free withdrawals if you sever employment between age 55 and 59 ½.
- Check with your Human Resource Department before rolling over your 401k to your IRA if you think you might need money between the ages of 55 and 59 ½.
Age 59 ½
- You can take IRA withdrawals without a 10% penalty.
- This is the earliest age that a Widow or Widower can collect benefits from Social Security.
- You can receive Social Security benefits any time between age 60 and your full retirement age as a Survivor.
- You may choose to begin receiving Social Security retirement benefits. If your full retirement age is 66 and you begin to take your benefits at age 62, your benefits will be permanently reduced by 25%. If your full retirement age is 67, benefits will be reduced by 30%.
- You are now old enough to qualify for a Reverse Mortgage.
- You are now eligible for Medicare; however, you are not yet eligible for full retirement benefits under the Social Security system.
- You may be entitled to a larger Federal tax deduction if you do not itemize.
- It may be time to begin considering retirement if you are not already retired.
- This could be full retirement age depending on your birth year. At full retirement age, you are able to collect your full Social Security benefit. If you were born in 1937 or earlier, your full retirement age is 65. Full retirement age gradually increases to age 67 if you were born on or after 1960.
- Interesting fact – 10,000 Baby Boomers become eligible for Medicare and Social Security each day for the next two decades and 10,000 a day are retiring!
- Up to this point, you could have delayed your retirement and Social Security benefits would increase based on your date of birth (8% a year).
- Once you reach 70, Social Security benefit increases no longer apply, so this should be the latest you should begin these benefits.
Age 70 ½
- You must begin taking RMDs (Required Minimum Distributions) from your IRAs, whether you are retired or not.
- Your RMD is calculated by dividing your IRA account balances(s) as of December 31st by a formula provided by the IRS.