9 Retirement Planning Milestones By Age
When I get older, losing my hair, many years from now …. Will you still need me, will you still feed me, when I’m 64?
When Paul McCartney wrote those wonderful words, was he thinking about retirement? Hardly. But in thinking about your retirement, whether you are 24 or 64, there are certain age milestones that you should be aware of when planning for your retirement. Learn the 9 retirement planning milestones you should hit below.
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Age 49 and Under: Save, Save, Save
When saving for your retirement, there is perhaps nothing more important than benefitting from the “magic” of compounding interest, so the younger you are when you start socking money away, the better. Roth IRA’s work best at this stage—pay taxes now at a lower rate, watch your investments grow tax-free for years.
Age 50: Increase Contribution Limits
Starting at 50, you can take advantage of an increased contribution limit for both your 401(k) and IRA. If you’re 50 or older you can make 401(k) catch-up contributions of up to $6,000, for a maximum 401(k) contribution of $25,000 in 2019. You can also deposit an extra $1,000 in an IRA, or $7,000, for 2019.
Age 59 ½: Withdrawals with No Penalties
You can start taking withdrawals from your 401(k) and IRA without penalty at age 59 ½. Before this age, you’re subject to a 10 percent early withdrawal penalty.
Age 62: First Year for Social Security Eligibility
This is the first year that you can begin collecting your Social Security payments. However, if you start taking your social security at this age, your monthly check will be significantly lower than if you wait a few more years. For example, if your full retirement age is 67 and you retire at 62, that will translate into about a 30% monthly reduction in benefits.
Age 65: First Year for Medicare Eligibility
Medicare eligibility begins at age 65. You can enroll during a seven-month period that starts three months before the month you turn 65. Make sure you enroll on time because your Medicare Part B premiums will increase by 10 percent for each 12-month period you were eligible for benefits but did not sign-up.
Age 66: Full Retirement Age for Many Baby Boomers
If you’re a baby boomer born between 1943 and 1954, you qualify for your full Social Security benefit at age 66. The Social Security full retirement age gradually increases from 66 and two months to 66 and 10 months if you’re born between 1955 and 1959.
Age 67: Full Retirement Age if Born 1960 or After
The Social Security full retirement age is 67 for workers born in 1960 or later. Once you reach your full retirement age, you can work while receiving Social Security benefits without having any of your payments withheld.
Age 70: If You can Wait, Do
You can increase your Social Security payments if you delay claiming your benefit between your full retirement age and age 70. This can provide you with a significant bump in your Social Security-- payments increase by 8 percent for each year you wait to start your payments. There is no additional benefit to waiting for your Social Security after age 70, so sign up!
Age 70 ½: Required Withdrawals
When you’re age 70 1/2 and older you’re no longer eligible for retirement plan tax deductions and are required to start taking annual withdrawals from 401(k)s and traditional IRAs and pay taxes on what you’ve taken out. The penalty for missing a required minimum distribution is a lot—50% of the what you should have withdrawn, so don’t miss this deadline!
So, there you have it. Pay attention to these age milestones and hopefully, you’ll be on your way to a comfortable retirement. Of course, if you have questions along the way, don’t hesitate to ask us!
