Retirement Planning - Notable Birthdays

It’s essential to keep a few things top of mind as a retirement account proprietor, like tracking your contributions, investment performance, and annual fees. You should also note important milestone birthdays and the changes they represent. Below, we have documented the most important ages for your retirement accounts, starting with age 49.

Age 49: Maxing Out Your Retirement Accounts

For employees still active in their careers, this is the best time to max out your retirement accounts. Workers with a 401(k) or other retirement savings account, through their employer, qualify for certain tax breaks and employer contributions. In 2022, the 401(k) contribution limit is $20,500, up from $19,500 in 2021, thanks to new COLA increases, which you can read more about here.

If you’re planning to max out 401(k) contributions for 2022, it’s beneficial to start early, as spacing it out might be more manageable than year-end increases. Higher earners may also consider front-loading 401(k) contributions to reach the deferral limit before year-end. However, you must understand how your 401(k)-match works before you do this.

Age 50: Catch-Up with Annual Contributions

At age 50, workers can make “catch-up” contributions to their 401(k), in addition to their annual contribution limit of $20,500, up from $19,500 in 2021. Catch-up contributions in 2022 remain at $6,500. [1]

Age 55: Withdraw Money From Your 401(k)

Many people aren’t aware that they can start withdrawing from their 401(k) or other employer-sponsored retirement plans starting at age 55. If you leave your job for any reason, you’re able to withdraw from the retirement plan at the job you left, penalty-free. Keep in mind that this does not apply to any funds rolled into an IRA, SEP, or SIMPLE IRA’s[2].

Age 59 ½: Access IRA Funds, Penalty-Free

Once you reach 59 ½, you can withdraw from your IRA without incurring a 10% penalty. However, distributions will not be required until you are after the age of 72[3].

Age 63: Enjoy Early Retirement (If Applicable)

According to the Society of Actuaries, the average retirement age in the United States is 63 years old, with the average retirement lasting for 21 years. Social Security contradicts this, defining 62 as the early retirement age. Retirees with pensions, or those who managed to amass considerable savings and can stay on budget, will likely be in good shape if they decide to retire at age 62 or earlier. Individuals financially less stable may want to consider working past the average retirement age.

Age 65: Enroll in Medicare

With Medicare eligibility beginning at 65 years old, there is a seven-month enrollment period you should be aware of. This window includes 3 months before you turn 65, your birth month, and 3 months after your birth month.

It is also worth noting that Medicare Part B premiums increase by 10% for each year you were eligible for benefits but did not enroll. If you or your spouse are still covered through an employer, you can defer Medicare enrollment without penalty.

Age 66/67: Social Security Benefits

The Social Security full retirement age varies based on your birth year. Those born between 1943 and 1954 can file for their Social Security at age 66 while those born in 1960 or later must file at the age of 67. Knowing when your specific full retirement age is will allow you to make informed filing decisions.

Age 70 1/2: Qualified Charitable Distributions

QCD’s are only available to individuals aged 70 1/2 and older who own an IRA or an inherited IRA. QCD’s are capped off at $100,000 per IRA owner each year. An interesting fact for anyone interested in making a Qualified Charitable Distribution is that no deduction can be taken, and nothing can be received in return for your donation. If you would like an in-depth overview of the reminders and pitfalls that may be attached to your QCD, read more HERE.

Age 72: Mandatory Required Minimum Distributions

Required Minimum Distributions (RMDs) apply to qualified retirement plans such as 401(k)s, 403(b)s, and IRAs after you turn 72.[4] RMDs are the minimum you must withdraw each year with the ability to request more. Withdrawing more from a traditional retirement account could mean a higher tax burden and an end to tax-free growth for the withdrawn funds. If you forget to take an RMD, there is a 50% penalty based on the RMD you were supposed to take, on top of the tax you’ll owe. You can talk to a financial advisor to create a plan to avoid missing RMDs and to develop a long-term tax minimization plan. This could include converting part or all of your traditional retirement account to a Roth IRA or strategically drawing on other income sources.

Understanding all your options and your entire retirement timeline can help you prepare for the future. We can help you celebrate all your important birthdays by creating a comprehensive retirement plan designed strategically for you. Click HERE to schedule your complimentary review to start talking to us about your retirement goals.