As you begin to contemplate retiring there are some important milestones to be aware of before finally deciding to finally making the transition. Here are a few important ages to mark the journey to living on your retirement income:
AGE 59 1/2: Traditional IRA withdrawal penalties disappear.
After you hit age 59 1/2 you can access the money in your Traditional IRA account by taking withdrawals without being subject to the 10% early withdrawal penalty. You will still owe ordinary income tax on the amount you withdraw, just not the additional 10% penalty.
Age 62: Eligibility for Social Security benefits begins.
The age at which you begin receiving your Social Security Benefits affects your benefits, but the earliest age of eligibility is 62. By starting to collect your benefits at 62, your monthly benefit amount will be lower than if you wait until your full retirement age. Depending on your year of birth, full retirement age (FRA) can be either 66 or 67. By delaying the start of collecting benefits to age 70, you will receive an increase in the amount of monthly benefit of 8% for each year you delay past full retirement age.
Age 64 and 9 months: Enroll in Medicare
The initial Medicare sign-up window lasts for seven months. If you miss it, you may have to pay higher premiums for life. However, if you still have medical insurance provided by an employer, including your spouse’s employer, you can postpone enrolling until that coverage ends without having to pay higher premiums. Go to Medicare.Gov to check your eligibility.
Age 70 1/2: Begin Required Minimum Distributions (RMDs)
At age 70 1/2 you must begin making withdrawals from your tax qualified retirement accounts equal to a percentage set by the IRS life expectancy tables. (IRS Table 1) These withdrawals must begin the year you turn 70 1/2, by April 1st of the following calendar year. Subsequent withdrawals must occur annually by the 31st of December.
These withdrawals are taxed as ordinary income in the year the withdrawal is made. Although the government requires that you make the withdrawal from your tax qualified accounts, that doesn’t mean the amount withdrawn has to be spent.
Be aware of important markers on the journey from career to retirement. If you have questions or are unsure about the steps along the way, seek qualified financial advice from a Certified Financial Planner.