You might think of retirement planning in terms of one major goal that you must reach: If I save X amount of money by ___ years old, I can retire! That is certainly one way to look at it, but the reality is that retirement planning is more of a marathon, with various check-in points, rather than a single sprint to a finish line. As you plan for retirement, and even after you retire, keep the following milestones and their associated goals in mind.
Age 50. Hopefully, you have been saving for retirement for years before reaching age 50. But once you hit this milestone, you can begin making additional “catch up” contributions to your retirement fund. In 2016, you can stash an additional $6,000 dollars in your account while enjoying the same tax advantages you gain from regular contributions.
Age 59 ½. This is the first age at which you can begin taking distributions from your retirement account without triggering a ten percent early withdrawal penalty. You’re probably still working at this age, but a few lucky people are able to retire early.
Age 62. This is the first age at which you can file for Social Security benefits. Your benefits will be about 25 percent less than they would have been, if you had waited until full retirement age. But this is good information to know, in case you need to retire early due to disability, illness, or some other reason.
Age 65. At age 65, you are eligible for Medicare benefits. If you choose to retire before age 65, you should make sure you have some other way to cover medical expenses until you reach Medicare eligibility.
Age 65 to 67. For the majority of baby boomers, full retirement age (as defined by Social Security) falls between age 65 to 67. Your full retirement age depends upon your year of birth. This is the age at which you can claim your full scheduled benefits from Social Security.
Age 70. You can also delay your Social Security claim, and earn an 8 percent increase on your checks for each year that you wait to file for benefits. This increase stops at age 70, though, so go ahead and claim your benefits at that point.
Age 70 ½. Once you reach age 70 ½, you must begin taking distributions from your retirement account, if you haven’t already. Remember this important date, and take your scheduled distribution, or you will be penalized by the IRS at 50 percent of the amount you should have withdrawn. Ouch!
Call our office for more information on retirement planning. We can analyze your specific situation and help you make the right decisions for your own unique timeline.
Portions of this article have been excerpted from “Top 7 Retirement Milestones You Need to Know” by Kelly Campbell, U.S . News Money.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.