Key Dates During Retirement
Just like any goal in life, your retirement is met in stages. Those stages often coincide with a particular age date and are comprised of different levels of benefits and opportunities to protect your lifestyle. Marianela Collado, Senior Financial Advisor at Tobias Financial Advisors, shares how to maximize your wealth during retirement and keep track of key dates. She discusses this more in the Personal Finance section of El Nuevo Herald:
Key dates during retirement
This article was featured in the Personal Finance section of El Nuevo Herald on Sunday, July 3, 2016. Please find the link to the published article at the bottom of this post.
As the retirement date approaches, there are many dates driven by age that are very important. The key dates that retirees need to keep in mind are as follows:
Age 50 – Effective for the tax year in which individuals reach the age of 50, there is an opportunity to increase the contributions to their retirement accounts such as IRAs and employer sponsored plans such as 401K plans.
This is referred to as a “catch up” contribution. The maximum allowable increases from $18,000 to $24,000 for employer sponsored plans and from $5,500 to $6,500 for IRAs.
Age 55 – For those individuals that are still employed and wish to retire early (at age 55), they can begin taking withdrawals (early without penalty) from their employer sponsored plans such as 401Ks. This does not apply to IRAs.
Age 59 ½ – This is a date most individuals are aware of. It represents the date in which you can begin taking withdrawals from all your retirement plans without a penalty. Income tax might apply. Those individuals still employed will have to confirm that withdrawals are allowed while still working.
Age 62 – Represents the date in which individuals can begin collecting social security benefits. Two very important items are to be considered – Those individuals who are still working may have their benefits reduced if those wages exceed a certain level and the benefits at age 62 are reduced by approximately 30%.
Age 65 – This is a very important date for two reasons – Retirees can now sign up for Medicare. For those who funded Health Savings Account, it represents the date in which withdrawals can be made for anything other than medical expenses without incurring a penalty. It will still be taxable though, so be careful.
Age 65-67 – Depending on your year of birth, these ages may represent “full retirement age” for purposes of collecting social security benefits. Once “full retirement age” is attained, it does not matter how much income you earn from working, your social security benefits will not be reduced. Full retirement ages are as follows:
- Those born in 1937 or earlier – Age 65
- Those born between 1938 and 1942 – Age 65 and some months
- Those born between 1943 and 1954 – Age 66
- Those born after 1954 – Age 66 and some months
- Those born after 1959 – Age 67
Age 70 – This represents the date to start collecting for those who deferred collecting social security to get the highest benefit since the benefits stop increasing.
Age 70 ½ – For those who have had the luxury of not needing to take withdrawals out of existing IRAs and other 401K retirement accounts, this is the date where distributions are REQUIRED or a penalty will be imposed. This is to prevent the indefinite accumulation of funds meant to be used during retirement.
As with any financial decisions, we always recommend that you speak with your financial advisor or accountant to make sure you are making the right choice for your circumstances.
Link to the article on El Nuevo Herald: http://www.elnuevoherald.com/noticias/finanzas/article87437802.html