Did you know that your birthdays become more important in the years approaching retirement? That’s right! Once you hit age 50, there are certain birthdays, also known as “legislative birthdays”, that indicate it’s time for you to take action on certain aspects of your retirement planning or that allow you to claim new financial benefits.
Let’s take a look at some important birthdays you might want to keep special track of.
Your 50th birthday is the first where you can take advantage of certain retirement planning privileges. After you turn 50, you’re eligible to begin making “catch up” contributions to your retirement accounts, including the following:
- 401(k) plans
- SIMPLE 401(k) plans
- 403(b) plans
- 457(b) plans
- Traditional IRAs
- SIMPLE IRAs
At age 55, should you decide to stop working, you can start to take contributions from an employer-sponsored 401(k) plan without incurring the 10% early withdrawal penalty for early withdrawal. Of course, if you don’t plan to retire at 55, you may choose instead to use this time to review your retirement plans and make adjustments as necessary.
Age 59 ½
After age 59 ½, you can take withdrawals from your 401(k) plan without incurring the extra 10% tax penalty for withdrawals, whether or not you plan to retire at this age. You need to consult your individual 401(k) plan to ensure that you meet the requirements for withdrawal at 59 ½.
When you turn 62, you become eligible to take Social Security benefits. However, it may not be financially advantageous to begin collecting right after you turn 62.
You will want to wait until you reach full retirement age (FRA) if you want to maximize your Social Security benefits. Depending on your birth year, this age will vary; your financial advisor can help you to determine when it makes the most sense for you to start taking Social Security benefits.
Prior to Age 65
Three months before your 65th birthday, you will enter into a seven month window during which you are eligible to enroll for Medicare. By this point in time, if you’re already taking Social Security benefits, you may already be enrolled in Medicare. But if you’re not – or if you’re uncertain – it’s important not to miss this window.
At age 70, you reach the maximum age for delaying your Social Security benefit. Even though you may not be ready to retire, you may want to consider your options for taking your Social Security benefit in order to receive the maximum benefit. Just remember, if you continue working and also take Social Security, you will continue to pay Social Security taxes on your taxable income.
Age 70 ½
For most investors, age 70 ½ is the age by which you must begin drawing the required minimum distribution (RMD) from your tax-deferred retirement accounts. Usually, you have until April 1 after you turn 70 ½, but it’s important to understand the requirements for your specific accounts.