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Eight Important Retirement Planning Milestones

Robert Schwartz, AIF®

Senior Retirement Consultant, Tycor

Whether you are just starting your working career or whether you are approaching retirement, here are some important ages / milestones you should be aware of when planning for retirement. Please plan accordingly because your retirement will be here before you know it.

  1. In your 20s - Start contributing to your company 401(k) plan and/or an Individual Retirement Account (IRA). The earlier you start to plan and save for retirement the better off you will be.
  2. Age 50 - Take advantage of 401(k) and IRA catch up contributions. In 2020, if you are age 50 or older, you can contribute an additional $6,500 into a 401(k) Plan and an additional $1,000 into an IRA account. In 2020, workers age 50 and older can contribute as much as $26,000 to a 401(k) plan and $7,000 to an IRA.
  3. Age 59 ½ - Once you turn age 59 1/2, you will no longer have to pay the 10 percent early withdrawal penalty on pre-tax distributions from your 401(k) Plan or traditional IRA. However, income tax will still be due on pre-tax 401(k) contribution withdrawals and traditional IRA withdrawals.
  4. Age 62 – At age 62, you are eligible to start to receive your Social Security retirement benefit albeit at a reduced rate. Benefits received at age 62 can be permanently reduced by up to 30% of the full retirement age benefit. Also, if you work and start to receive Social Security benefits, part or all of your payments could be temporarily withheld.
  5. Age 65 - Eligibility for Medicare begins at age 65. You can enroll as early as three months before your 65th birthday. When you're first eligible for Medicare, you have a seven-month initial enrollment period to sign up. If you don't enroll during this period, your Medicare premiums could permanently be increased and you could even possibly be denied coverage.
  6. Ages 66-67 - Age 66 is the age most baby boomers, people born between 1943 and 1954, become eligible to collect the full Social Security payments they have earned. For people born after that, the full retirement age gradually increases from 66 and two months for workers born in 1955, to 66 and 10 months for people born in 1959. Beginning at your full retirement age, there is no longer a penalty for working and collecting Social Security benefits at the same time. Age 67 is the Social Security full retirement age for anyone born in 1960 or later.
  7. Age 70 - This is the age you should file and claim your Social Security retirement benefit if you already haven’t done so. After age 70, there is no additional benefit to postponing Social Security payments.
  8. Age 72 - For anyone born on or after July 1, 1949, your first Required Minimum Distribution (RMD) from your 401(k) Plan and Traditional IRA is due by April 1 of the year after which you turn age 72. If you fail to withdraw at least the required minimum amount, there will be a tax penalty on the amount that should have been withdrawn in addition to the income tax owed.

 

If you have any questions about this article or you would like to review your 401(k) account, talk with a Tycor professional.

Call (610) 251-0670 for more information.

 

 



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