Unlocking Retirement Milestones
By: Jeff Bernier, CFP®, ChFC, CFS
Birthdays aren't just about cake and candles 🎂 they're also milestones shaping our financial journey. Remember the "and-a-half" birthdays from childhood? Well, they make a comeback in our 50s with newfound significance. These milestones play a key role in our retirement income and benefits. Navigating them wisely is crucial for solid financial planning and a secure future. Let's dive into the impactful birthdays after 50 that deserve our attention.
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At age 50, workers in certain qualified retirement plans are able to begin making annual catch-up contributions in addition to their normal contributions. Those who participate in 401(k), 403(b), and 457 plans can contribute an additional $7,500 per year in 2023. Those who participate in Simple Individual Retirement Account (IRA) or Simple 401(k) plans can make a catch-up contribution of up to $3,500 in 2023. And those who participate in traditional or Roth IRAs can set aside an additional $1,000 a year.1,2 |
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At age 59½, workers are able to start making withdrawals from qualified retirement plans without incurring a 10% federal income tax penalty. This applies to workers who have contributed to IRAs and employer-sponsored plans, such as 401(k) and 403(b) plans (457 plans are never subject to the 10% penalty). Keep in mind that distributions from traditional IRAs, 401(k) plans, and other employer-sponsored retirement plans are taxed as ordinary income. |
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At age 62, workers are first able to draw Social Security retirement benefits. However, if a person continues to work, those benefits will be reduced. The Social Security Administration will deduct $1 in benefits for each $2 an individual earns above an annual limit. In 2023, the income limit is $21,240.3
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At age 65, individuals can qualify for Medicare. The Social Security Administration recommends applying three months before reaching age 65. It's important to note that if you are already receiving Social Security benefits, you will automatically be enrolled in Medicare Part A (hospitalization) and Part B (medical insurance) without an additional application.4
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Between ages 65 and 67, individuals become eligible to receive 100% of their Social Security benefit. The age varies, depending on birth year. Individuals born in 1955, for example, become eligible to receive 100% of their benefits when they reach age 66 years and 2 months. Those born in 1960 or later need to reach age 67 before they'll become eligible to receive full benefits.5
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In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a traditional Individual Retirement Account and other defined contribution plans. You may continue to contribute to a traditional IRA past age 70½ as long as you meet the earned-income requirement.
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Understanding key birthdays may help you better prepare for certain retirement income and benefits. But perhaps more importantly, knowing key birthdays can help you avoid penalties that may be imposed if you miss the date.
As we journey through life, certain birthdays hold more significance than others due to various reasons, including their impact on our financial well-being and retirement planning. Along this journey, a financial advisor may be able to provide invaluable assistance in navigating these milestones.
Starting at the age of 50, catch-up contributions become an option, allowing us to proactively enhance our retirement savings. Upon reaching 59½, the opportunity arises to make penalty-free withdrawals from qualified retirement plans. The age of 62 marks the initiation of Social Security benefit availability, followed by Medicare eligibility at 65. As we progress between ages 65 and 67, eligibility for full Social Security benefits comes into play.
Understanding these pivotal moments empowers us to make well-informed choices, optimize our retirement income, and avoid potential penalties. To receive personalized guidance tailored to your unique circumstances, consider scheduling a call with a knowledgeable financial advisor who can offer insights and tailored strategies. Begin your journey today by clicking here to arrange a call with a TandemGrowth Wealth Advisor.
1. If you reach the age of 50 before the end of the calendar year.
2. IRS.gov, 2023
3. SSA.gov, 2023
4. SSA.gov, 2023. Individuals can decline Part B coverage because it requires an additional premium payment.
5. SSA.gov, 2023
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