When one thinks about their retirement, images of lounging poolside while sipping on a tropical beverage often come to mind. But retirement is not all relaxation and leisure. Before reaching this important milestone, there are other benefits occasionally neglected. Here are a few target dates to remember when approaching retirement.
When you turn 50, you’re eligible to defer taxes on 401(k) and 403(b) plans up to $23,000.
At age 55 certain individuals are permitted to obtain distributions from their funds early and without a 10% penalty. This occurs only from company plans like a 401(k). However, this exception does not include IRAs.
After age 59 ½, the standard 10% early withdrawal penalty on retirement accounts no longer applies.
62 years old is the age workers first become eligible to collect Social Security. But that perk is not without its drawbacks. If one chooses to cash in at 62 for Social Security payments, the overall amount reduces by about 25%. If possible, it’s often wise to wait.
Additionally, 65 is the age of eligibility to start collecting Medicare.
Either age 66 or 67, depending on one’s year of birth, marks the “full retirement age. This is where there is no longer a penalty to begin collecting Social Security.
After turning 70, there is no more incentive to delay receiving Social Security benefits.
At 70 ½, you must start withdrawing from your retirement account. Based on overall available funds and life expectancy, you can calculate your Required Minimum Distributions (RMDs). Skipping an RMD results in a major penalty, amounting to a 50% excise tax.
Are you ready for your own retirement target dates? Share your experiences in the comments below.