This article provides a general overview of a retirement time line without enumerating all the pros and cons surrounding the age specific decisions. Many people think major retirement decisions coincide with your 65thbirthday. In reality, many important decisions begin as early as age 50. Actually, you are never too young to start developing your long term financial objectives. “If I knew then what I know now …” is a phrase often spoken by seniors who would have done things differently if they had been more informed young enough to make intelligently planned decisions versus emotionally charged emergency ones in reaction to sudden life changing events.
Age 50: During the year in which you turn 50, you can begin to make catch-up contributions (beyond the normal contribution limits) to a 401(k) and many other retirement accounts.
Age 55: During the year in which you turn 55, you may receive amounts from an employer’s retirement plan without the 10% federal tax penalty if you separate from the service of that employer.
Age 59 ½: You may begin taking withdrawals from a retirement account without the federal 10% tax penalty, but be prepared to pay the taxes on the account’s growth at your current tax bracket. Of course, the more you leave in, the more the funds grow tax-deferred.
Age 62: You may be eligible to begin receiving Social Security (SS) benefits. However, by choosing to begin drawing SS before your Full Retirement Age (FRA), you would receive a permanently reduced monthly benefit.
Age 65: You are eligible for Medicare on the first day of the month you turn age 65. If you do not enroll during that month, and wish to enroll later, you may be required to pay a higher premium.
Age 66: If you were born between 1943 and 1954 you reach FRA at age 66, and are entitled to 100% of your SS benefits. If you were born in 1955 to 1959, add two months for each year to calculate your FRA.
Age 67: If you were born in 1960 or later, your FRA is age 67.
Age 70 ½: You must begin withdrawing your Required Minimum Distributions (RMDs) from most retirement accounts or incur significant tax penalties.
It is imperative to work with an independent knowledgeable financial professional or tax advisor to discuss your own retirement time line and specific objectives so you understand all your options and gain a clear picture of your retirement readiness.
Filomena Day, a former CPA, with 40 years of accounting, financial and coaching experience with individuals and businesses, works with people from ages 25 to 65 who would like to plan for a more comfortable retirement with tax free strategies. Call or write to be on her mailing list for free quality newsletters or to ask about her VIP Money Makeover program.
Pursuant to IRS Circular 230 this article is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement.