Watch Out for these Milestone Birthdays

Filed under: Retirement

32139856As we age, we tend to think all of our big milestones are behind us. You were able to drive at 16, you voted at age 18, and so on. Yet, when it comes to planning for retirement, there are several important birthdays you should anticipate. Several retirement programs and benefits are attached to these birthdays (or half birthdays, as the case may be), so you’ll want to keep these in mind when planning for retirement.

Age 59 ½. If you have a qualified IRA or other retirement plan, you probably know that in most cases, taking a distribution will cost you a 10 percent federal income tax penalty. Once you reach age 59 ½, however, you can take distributions without worrying about this tax penalty. Of course, regular income taxes will still apply. Try not to take any withdrawals from your retirement plan until you reach this age.

Age 62. After working and paying Social Security taxes for most of your life, you’re ready to retire and claim your benefits. Age 62 is the earliest age at which you can do this. However, age 62 is not considered “full retirement age”, and your benefits will be up to 30 percent smaller than they will be if you wait a few more years. Depending upon the year you were born, Social Security has set your full retirement age between 65 and 67. Waiting until you reach full retirement age will mean a larger monthly check, but in some cases people do need to retire at 62.

Age 65. You’re now eligible for Medicare. The enrollment process can take several months, so it’s actually better to go ahead and apply in advance of your 65th birthday. If you’re receiving Social Security benefits, you’re automatically eligible for Medicare Part A. You can also purchase Medicare Part B for a monthly premium.

Age 70 ½. Most tax-deferred retirement plans require you to begin taking distributions now, if you haven’t already been doing so, or risk a significant penalty. Your minimum distribution will be based upon your life expectancy.

13408 – 2014/5/15

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