Age Deadlines You Should Know:
50 - You can begin to put more tax deferred income into your 401(k) or your IRA than younger adults. Currently, at age 50 you can begin putting $23,000 into 401(k) plans or the federal government's Thrift Savings Plan, and you can put $6,500 into your IRA. The government tweaks the exact amount from time to time so, if you are younger than 50, keep an eye open to see what the amount is when you turn 50. You want to be sure you are saving the maximum allowable amount in your tax deferred retirement savings accounts.
In addition, if you work as a public-safety employee and retire or leave your job, at age 50 you can withdraw money from your retirement plans without paying a 10 percent penalty. You will still have to pay income taxes on the withdrawal.
55 - At this age, the rest of us can remove money from a 401 (k) that is associated with a job from which we have been laid off and not have to pay the 10 percent penalty. This also applies if we quit or retire from a job. You will still have to pay income taxes on the withdrawal.
59 1/2 - You can receive distributions from any of your traditional IRA's and 401(k)s without a 10 percent penalty but, you guessed it, you will have to pay the income taxes.
60 - Widows and widowers can begin to collect their Social Security benefits based on the earnings of a deceased spouse. However, their benefits will be substantially reduced, so this is not a wise idea if there is any way they can postpone claiming their benefits for at least several more years.
62 - Anyone who is eligible can begin to collect their Social Security benefits, although this is not a wise decision for most people. First of all, your benefits will be permanently reduced by about 30 percent. Second, if you are still working and you earn more than about $15,000 a year, you will lose part or all of your benefits. Of course, if you have lost your job and run out of unemployment benefits, or you find yourself in a similar difficult situation, you may need to take your benefits early. Just remember that it is almost always better to postpone taking Social Security as long as possible, if you can.
65 - You become eligible for Medicare. DON'T MISS THIS DEADLINE. Be sure to contact the Social Security Administration to sign up even if you are still covered by a policy on your job. You can start this process as early as three months before you turn 65 and this is particularly important if you want the coverage to start as soon as you are 65. If you wait longer than four months after you turn 65, your premiums could be permanently increased by 10 percent for every year that you delayed completing the proper paperwork. Your best bet is to get in touch with Medicare before you turn 65 so that you do not have to pay a penalty later in life, when you may be living on a limited fixed income.
66 - If you were born between 1943 and 1954, this is your full retirement age. This means you can collect your full Social Security benefits. In addition, you can still work without losing any of your benefits, if you choose to. Ideally, this is the youngest age for anyone to collect their benefits although, as I mentioned earlier, there are times when people simply cannot wait this long.
66 to 67 - The full retirement age for people who were born between 1955 and 1959 will occur sometime between their 66th and 67th birthday.
67 - If you were born in 1960 or later, your full retirement age is 67.
70 - If you wait to collect your Social Security benefits until you are 70, you will increase your benefits by about 8 percent for every year you delayed after your full retirement age. Don't wait any longer than age 70, however, because you will not get any increase in your benefits.
70 1/2 - If you have a traditional IRA or 401(k), you will need to begin making withdrawals and paying income tax on the withdrawals. There are a lot of rules involving this and, if you mess up, you can pay as much as a 50 percent penalty! Be sure to discuss this with your financial adviser and the company that manages your retirement account so that you handle everything correctly. On the other hand, if your retirement savings are in a Roth IRA, you do not need to begin making withdrawals and you will not need to pay income taxes on your withdrawals. You may want to read my recent blog post, "Traditional IRA vs Roth IRA" for more details about these two types of retirement accounts.
If you are researching ideas about how to retire someday, check out my index articles, below. Each one contains an introduction plus links to other articles that pertain to that topic:
Gifts, Travel and Family Relationships
Great Places for Boomers to Retire Overseas
Great Places to Retire in the United States
Health and Medical Topics for Baby Boomers
Money and Financial Planning for Retirement
You are reading from the blog: http://baby-boomer-retirement.blogspot.com
Photo of Social Security card courtesy of www.morguefile.com