Attention Plan Sponsors:
Learn About the Important Birthdays in the World of Retirement Planning.
Every birthday is important. As you age, every birthday matters. However, in the world of retirement planning, certain birthdays should be unforgettable.
Retirement planning is as much about money as it is about age. At a certain age, you can access money in your retirement plan accounts without penalties. At a certain age, you may actually retire, and the IRS will allow you to live your life penalty-free.
Read on about the birthdays that matter in the world of retirement planning so you can plan accordingly now and in the future.
Age 50
Age 50 is when the fun begins. Well, maybe fun is not the correct word. However, at age 50, some people begin to consider early retirement. Typically, IRAs and other qualified retirement plans allow taxable distributions subject to a 10% penalty (20% for SIMPLE Retirement Plans) for early distribution until age 591/2. However, if you are a qualified public safety employee, you can take penalty-free distributions at age 50.
Qualified public safety employees include the following:
- State and local police
- Firemen
- EMS workers
- Federal public safety workers such as federal law enforcement officers and federal firefighters
- Air traffic controllers
- Border protection officers
- Some custom officials
Age 55
If your employment ends when you reach 55, whether through retirement or termination, you may be eligible to take penalty-free withdrawals from your retirement plan. However, if you wish for these withdrawals to be qualified, you cannot continue to work. If you continue to work, you will not be eligible for penalty-free withdrawals at age 55.
Age 59 1/2
59 ½ is the magic number. Once you reach this age, you may take withdrawals without any penalty and without being unemployed. In other words, you may continue to work and take penalty-free taxable withdrawals from your qualified retirement plan.
Age 62
If you are retired by age 62, you may wish to begin to collect Social Security Benefits. While you will receive reduced benefits, you may actually begin collecting them at age 62. However, you may receive a reduced benefit of up to 30%. Therefore, if you do not need the Social Security benefits at age 62, it may be best to wait until you are age 66 or 67 (depending on the year you were born) to collect your full benefits.
Age 65
If you want to enjoy the benefits of Medicare, 65 is the magic number. At 65, you are eligible to enroll in Medicare. Medicare Part A hospital insurance benefits are automatic at age 65. However, you may opt into Medicare Part B medical insurance benefits for a monthly premium. Medicare representatives often advise that you enroll in Medicare about two to three months before reaching age 65 so your benefits kick in when you turn 65.
Age 73
Did you know that there comes an age where you must take distributions from your retirement plan or risk penalties. With the new SECURE 2.0 Act? 73 is now that magic age. At 73, if you do not begin taking at least the minimum distributions from your tax-deferred retirement plan, you may face a 25% penalty on the amount you should have withdrawn.
Conclusion
In the world of retirement planning, your age matters. To learn more about what your rights are regarding retirement planning and withdrawals, speak with a qualified retirement planning specialist. Scott Tanker of Retirement Plan Services Group would be happy to help you understand the birthdays that matter. Call today at 609-922-0201 to learn more.