When you think about milestone ages you may think of years like turning 18 and buying your first lottery ticket or when you turned 40 and your friends joked that you were officially over the hill. No matter what years felt special to you, there are some important ages to keep in mind relating to financial planning. These milestone birthdays can remind you to consider your options as they approach and discuss these key decisions with a professional.
50: Catch-up contributions
At age 50 you can increase contributions to your 401(k) or other retirement plans. These additional contributions are called catch-up contributions. In 2022, the maximum contribution limit is $20,500 with a catch-up of $6,500 for those 50 or older. For IRAs, the 2022 contribution limit is $6,000 with an additional catch-up of $1,000 for those 50 or older.
59 ½: No penalty for retirement account withdrawals
Before age 59 ½ there is a penalty for withdrawing funds from your IRA. However, once you surpass 59 ½ you can begin taking withdrawals without penalties, however, there still may be tax implications depending on the type of IRA. 59 ½ is also a great age to consider consolidating retirement accounts. Doing so can make it easier to track and organize your investments and it may help reduce taxes and fees.
62: You can begin taking Social Security
At age 62 you can begin receiving Social Security. 62 is the earliest you can get Social Security income, however, choosing to take the benefits at 62 can reduce your monthly benefit and that reduction is permanent. On the other hand, if you wait until full retirement age you can receive a higher monthly benefit as that is the age in which you are entitled to 100% of your benefits. An analysis can be done to determine the best time to take your Social Security benefit based on your unique situation and a statement providing Social Security income estimates can be obtained from the Social Security website.
65: Medicare enrollment
At age 65 you can sign up for Medicare, and this is one you will want to properly time out. Medicare’s initial enrollment period lasts for seven months, beginning 3 months before you turn 65, and ending 3 months after the month you turn 65. If you miss this enrollment period, you may have to wait to sign-up an pay a monthly late-enrollment fee.
66 or 67: Full retirement age
Finally, retirement! Full retirement age is when you are entitled to 100% of your Social Security benefits, determined by your lifetime earnings. For people born 1943-1954, full retirement age is 66. For those born after 1960, full retirement age is 67. The amount you receive when you first start taking benefits is what you will receive for the rest of your life and is dependent on the age you begin taking benefits. You can increase your retirement benefit by waiting past full retirement age to retire.
70: Latest delay credit for Social Security
Each month you put off filing up to age 70 earns you delayed retirement credits that will boost your benefit. You do not have to begin collecting Social Security by age 70, but your benefit will not increase if you delay claiming past your 70th birthday.
70 ½ or 72: Required Minimum Distributions
Required Minimum Distributions (RMDs) are the minimum amounts you are required to take from your retirement accounts each year beginning at age 72 (or age 70 ½ if you turned 70 ½ before January 1, 2020). This requirement allows the government to tax the money which had been growing tax-deferred for so long. If you fail to take an RMD, you may face a steep penalty of half the amount you did not withdraw.
As we start to age, we find ourselves busier and with more things to keep track of, it can be overwhelming. But, remembering these milestone ages can help you recognize when a financial decision, big or small, may be approaching and give you a chance to discuss those decisions with a professional to make the best choices for you.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate of complete. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.