Retirement planning is one of those things you have to get right. It can make all the difference between the retirement you’ve dreamed of and one that doesn’t even come close. As part of the planning process, there are certain times and events you need to be aware of. These are usually expressed in terms of age. So, here are important milemarkers on the Retirement Planning Timeline.
Age 50
Beginning at age 50, you are allowed to make catch-up contributions to your retirement accounts. These contributions are above the regular annual limits allowed to people of any age. The amounts are adjusted each year for inflation.
Age 55
Beginning at age 55, the IRS allows catch-up contributions to Health Savings Accounts.
Age 55
You can begin withdrawing money from your 401(k) without paying the 10% early withdrawal penalty. Here are the rules:
- You must leave your job during the calendar year you turn 55 or older.
- You can only withdraw from the 401(k) plan you are contributing to at the time you leave your job, not 401(k) accounts at previous employers.
- The balance of your account must stay in the employer’s 401(k) plan while you’re taking early withdrawals.
- You can withdraw from your 401(k) even if you get another job.
The same rules apply to 403(a) and 403(b) plans.
Age 59 ½
Penalty-free withdrawals can be made from traditional IRAs and other tax-deferred retirement accounts such as 401(k)s, 403(b)s, and Thrift Savings Plans (TSP).
Age 60
The Social Security Survivor benefit is available to widows/widowers beginning at this age. However, if you begin receiving a Survivor benefit between age 60 and your Full Retirement Age, you will receive a permanently reduced amount. The earlier you receive the Survivor benefit the smaller the amount.
Age 62
The earliest age you can begin Social Security. Taking Social Security between age 62 and Full Retirement Age (FRA) means a permanently reduced benefit. The only increases will come from annual Cost-of-Living-Adjustments, which are based on the inflation rate for the previous year.
Age 62
The earliest age a spouse can begin receiving a Spousal benefit, which is based on their spouse’s work history. Taking a spousal benefit between age 62 and Full Retirement Age (FRA) means a permanently reduced benefit. The only increases will come from the annual Cost-of-Living-Adjustment, which is based on the inflation rate for the previous year. A spousal benefit cannot be taken until the primary spouse is taking their own Social Security benefit.
Age 62
If you begin taking early Social Security (between 62 and your Full Retirement Age) and continue to work, and if you earn more than a pre-set annual threshold, which is adjusted every year for inflation, you give back part of your benefit. For every $2 you earn above the threshold, Social Security takes back $1. This restriction goes away when you reach Full Retirement Age(FRA). At that point, you can earn all you want without giving anything back. (The numbers are somewhat different if you retire part way through the year you reach FRA).
Age 65
Begin Medicare. An individual must enroll for Medicare during their Initial Enrollment Period, which runs three months before your 65th birthday, the month you turn 65, and three months after the month you turn 65. If you do not enroll during this period and later enroll, you will be accessed a late enrollment penalty for Part B Medicare and another penalty for Part D prescription drug coverage. These penalties last for the rest of your life.
The only exception is if you are covered by a creditable employer health plan, which means a plan that covers 20 employees or more. If that’s the case, you can enroll without penalty when you no longer receive employer coverage.
If you are already receiving Social Security benefits when you are first eligible for Medicare, you will be enrolled automatically.
Age 66-67 Full Retirement Age
At the moment, Full Retirement Age (FRA) is between 66 & 67 depending on when you were born. At FRA you receive a full, non-reduced Social Security benefit. However, if you wait past FRA to begin benefits, you receive an 8% per year permanent increase to your Social Security benefit for each year past FRA you wait to begin your benefit. These are called delayed credits.
Full Retirement Age to Age 70
If you retire between your Full Retirement Age (FRA) and age 70, you have the option of receiving a lump sum check equal to 6 months of your Social Security benefit. Unless you specify that you don’t want the lump sum, you will receive it automatically, and your Social Security check will be reduced by 4%. By taking the lump sum, the SSA system deems you to have retired 6 months earlier than you did, thus giving you the smaller Social Security check permanently.
Age 70
At age 70, delayed credits stop, so there’s no reason to postpone receiving your Social Security benefit.
Age 70 1/2
Qualified Charitable Distributions (QCD) can begin. QCDs allow you to give up to $100,000 each Year to 501(c)(3) tax-exempt organizations from your Traditional IRA, Rollover IRA, Inherited IRA, inactive SEP and inactive SIMPLE IRA. If you’re married, your spouse can also give up to $100,000. You don’t get a tax deduction for the charitable gift, but the withdrawal from your tax-deferred account is not taxed. This can be important when your Required Minimum Distributions (RMD) begin at age 73.
You cannot make Qualified Charitable Distributions (QCD) directly from a 401(k) account, but you can do a direct rollover from your 401(k) to your IRA and then make the QCD.
Age 73
Required Minimum Distributions (RMD) must begin. The government gets antsy and can’t stand it any longer that you haven’t paid taxes on those tax-deferred contributions, so you’re forced to begin taking withdrawals and pay taxes on it. There is an IRS formula that calculates how much you have to withdraw each year. As mentioned above, Qualified Charitable Distributions may be something to consider when it comes time to take your RMDs.
The age to begin Required Minimum Distributions goes up to 75 beginning in 2033.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice, or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at [email protected].
