We all know we should be saving and planning for retirement. We’ve heard about the wonders of compound interest and we know that a person who starts saving in their twenties will accumulate roughly twice as much money for retirement as a person who starts saving the same amount in their forties.
But maybe, back in our twenties, we somehow missed the memo that advised us to contribute to our 401K. Which makes us wonder, what other age milestones for retirement might we overlook?
Here are your next eight milestone ages to keep in mind for ensuring a successful retirement.
1) AGE: 50
When you reach the age of 50, you may begin to make “catch up” contributions to your IRAs as well as your 401K or 403B. The “catch up” provisions allow you to increase the amount you contribute, letting you add extra cash above the usual limits of your plan. For example, you may invest an additional $1,000 to your IRA or an additional $5,500 a year to your 401K.
2) AGE: 55
When you reach the age of 55, if you retire or separate from service of an employer’s retirement plan, like a 401K, you may take a distribution without the 10% early withdrawal tax penalty.
3) AGE: 59 ½
When you reach the age of 59 ½, you may start to withdraw retirement money from your retirement savings plan account, 401K, or IRA without incurring the IRS’s 10% early withdrawal penalty, although income taxes still apply to any deductible contributions and earnings. Also, if you have held a Roth IRA account for at least 5 years, you may withdraw any earnings from there without taxes or penalties as well. This is one of the most eagerly anticipated milestones.
4) AGE: 62
When you reach the age of 62, you may choose to begin receiving Social Security benefits at a 25% payout. However, if you start withdrawing at this age, you will receive much smaller monthly checks. So, to receive more money with a higher monthly take, wait until a later age if you can.
In addition, you also reach the age of eligibility for a Reverse Mortgage. A Reverse Mortgage is a government-insured loan that allows you to access the equity in your home and convert it into tax-free cash, which many have used as a strategic retirement and financial planning tool.
5) AGE: 65
When you reach the age of 65, you qualify for Medicare regardless of whether or not you continue to work. If you have chosen NOT to receive Social Security benefits yet, then you must apply for Medicare (plan to do this three months before your 65th birthday).
6) AGE: 66 or 67
When you reach age 66 or 67, you have reached the age that you may collect 100% of your Social Security benefits. This is your “Full Retirement Age”. Depending on your birth year, your full retirement age is:
- 66 if you were born between 1943-1954
- 66 ½ if you were born 1955-1959
- 67 if you were born 1960 or later
7) AGE: 70
If you have held off on taking your Social Security benefits in order to wait for higher payment amounts, you should know that this is the age that payments reach their maximum amount.
8) AGE: 70 1/2
Last, but not least, is the final retirement age milestone. When you reach the age of 70 1/2, the government requires you to begin taking minimum distributions from your Social Security, Traditional IRA, and other retirement plans. If not, you may face a heavy tax penalty. You are not required to withdraw from your Roth IRA, however.
Congratulations! You are now armed with the knowledge of the next eight important retirement milestone ages. Keep an eye out for these birthdays and you’ll be on your way to a well-prepared retirement. Happy planning!