Important age milestones in retirement planning
When it comes to retirement planning, it is an ongoing, dynamic process. However, there are some important ages in your retirement journey which matter more and are more important than the others. Thinking about money the rest of your life can be daunting, but instead of doing it all at once, break it down and compartmentalize the process and journey of your retirement planning according to the following five age milestones to make it a little easier on yourself.
- Age 55: 55 is an important age for those who have a retirement plan through their employers, such as 401(k). One is allowed to withdraw retirement savings penalty-free from such plans after the age of 55 as long as one isn’t working with the said employer. While this is useful if one plans to retire early, the 401k cannot be rolled into an IRA. Many businesses also consider 55 as senior citizen age, and one can take advantage of discounts offered.
- Age 59½: This is the widely-usual age at which one can withdraw money from their retirement accounts, (IRAs included) without having to pay a penalty. One can withdraw even if they are still on the job.
- Age 62: The 62nd year is monumental at this age one is eligible, if he/she chooses to, to collect Social Security benefits. The only drawback to this is that if one files for Social Security earlier, the standard retirement benefit that one could receive reduces by 30% for his/her entire life. Nevertheless, if one wishes to do so, then they become eligible for Social Security benefits from 62 years of age onward.
- Age 65: 65 is important because this is where Medicare eligibility flags off, and it is also the age that is considered as ‘full retirement age’ by many public and private sector companies. The period for retirees applying necessarily for Medicare begins three months prior to one turning 65 and three months after their birthday, after which the premiums increase by 10% percent for every 12-month period that one was eligible for benefits but did not enroll.
- Age 66/67: Depending on the year in which one was born, the full retirement age is between 66 and 67 for Social Security. If one is 66 years and a few months in between, their benefit will decrease by 6.7% for each year they apply early (up to 3 years), and by 5% for each year after that. If one applied later, their benefit will increase by 8% for each year they delay collecting their benefits beyond they reach their full retirement age.
- Age 70: Last comes the age of 70, which is important for two reasons one, it is the last age one can wait till to file for Social Security benefits and second, one needs to begin making distributions from their retirement accounts at the age of 70½, if they haven’t done so, that is. There are no additional benefits of waiting longer to file benefits.