Age Milestones Before Your Retirement: Here’s What Matters The Most
There are a lot of age milestones throughout your life and no doubt, you have fond memories of all those milestones. Your first birthday, when you touch double digits, i.e. on your 10th birthday, your step into your teens, i.e. your 13th birthday, so on and so forth. Similarly, there are birthday milestones when you have thought of doing something for the first time. For example, you drove your car for the first time after you turned 16, voted for the first time when you reached 18 or visited a bar for the first time as soon as you turned 21, etc. There are a few milestones in the latter half of your life as well and of course, retirement is one such milestone. Having a proper idea about all these can be beneficial in preparing for life after you hang your boots.
As soon as you reach the doorstep of 50, you know it’s time to gear up for the future. People who are 50 years of age can start contributing an extra $6500 to their 403(b)s as well as 401(k)s every year. Those individuals who are 50 and above and have been contributing to IRAs and Roth IRAs can add an extra $1000 to take the maximum contribution per year to $7000.
When an individual takes out money from their retirement accounts before they attain the age of 59 and a half, they usually have to shell out income taxes as well a federal penalty of 10%. The penalty is not applicable for money withdrawals from 403(b) and 401(k) if they are 55 years of age or above when they lose their job, quit their job, or take retirement. The rule of separated from service disappears by the year you turn 55 or the next year.
Turning 59 and a half
When you are six months short of turning 60, you can withdraw money from IRAs or different workplace plans without having to shell out a fine. There are certain 401(k) plans for workers that permit those who are a minimum of 59 and a half to transfer money into an IRA even if they haven’t taken retirement and are putting money into the 401(k). If you take an interest in this, you can contact your 401(k) provider or check with the human resources department at your workplace to make sure whether you can avail of the option.
In the case of widows and widowers, the earliest that they can start availing of Social Security survivor benefits is age 60. Disabled survivors can start availing survivor benefits by the time they turn 50, or at any other age if the survivor has to look after the children of the deceased spouse, especially those who haven’t attained the age of 16 or are disabled.
The earliest that you can start availing of Social Security retirement benefits or Social Security spousal benefits is 62. However, there might be a permanent reduction in your checks if you opt to avail of the benefits before you attain the retirement age, i.e. 66 or 67. Aside from that, there will be an earnings test that can bring down your benefit by $1 for every $2 you rake in over a specific amount. This amount, as of now, stands at $18,960. After you attain the retirement age, you wouldn’t have to face the earnings test.
A majority of Americans become eligible for Medicare when they turn 65. Generally, one wants to get enrolled into the government healthcare program within the seven months around your birthday, i.e. three months before your 65th birthday, the month of your 65th birthday, and three months after your 65th birthday. If you make delays, you might have to shell out increased premiums permanently. You can understand the way Medicare works by logging on to medicare.gov or call 1-800-633-4227.
Turning 66 to 67
For individuals born between the years 1943 and 1954, the retirement age stands at 66. The retirement age increases by two months every birth year post that until people born in the year 1960 or later attain the age of 67.
Those who wait for the right time i.e. the full retirement age to start Social Security reap maximum benefits than others. The benefit rises by 8% every year until it becomes maximum at 70. Therefore, you need to meticulously plan as you come closer to your retirement age.
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