Important Age Milestones in Retirement and Why Your Half Birthday Really Does Matter

59½? 70½ ? How does the IRS come up with these?

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If you ask each of my three children how old they are, I’ll bet at least one of them will say their age plus a half: “I’m five and a half!” I love how they say it with pride so you don’t forget it! Once you get past age 21, there is a lull in significant birthday milestones, but as you’ll see, half birthdays do come into play as you get older and closer to retirement.

Age 50 – Eligible for IRA catch-up provisions. This year, you can put an extra $1,000 a year into an IRA or Roth IRA, if otherwise eligible ($6,500 total), and an additional $5,500 into a 401(k) plan ($23,000 total). Also, be on the lookout for AARP mailings and discounts to start!

Age 55 – Possibly take penalty-free 401(k) withdrawals. The 10% early withdrawal penalty is lifted in cases where you leave a job after 55 and the 401(k) was from your most recent employer. But just because you can avoid a penalty doesn’t mean this is necessarily a good idea for everyone.

Age 59 ½ – No more 10% early withdrawal penalty for IRAs and 401(k)s. Withdrawals are still taxed as income, but the extra penalty goes away. Again, you should seek advice to determine if this makes sense for you. Roth IRA contributions also reach one of their two flag posts, making withdrawals of contributions tax-free (the other is the account is open for 5 years). Be careful here, because a separate “5-year rule” applies to each Roth IRA conversion you may have done.

Age 60 – Get big discounts. Take advantage of “senior” pricing at shops, restaurants, and entertainment!

Age 62 – First eligibility for Social Security. Drawing early at age 62 means you’ll receive reduced benefits. If you continue to work, your benefits could be withheld due to a wage limit. This goes away at full retirement age (see 66-67).

Age 65 – Eligible for Medicare coverage. At this age, Medicare becomes the primary medical insurance for many people.

Age 66-67 – Reach Social Security’s “full retirement age.” Caps on what you can earn from a job are removed.

Age 70 – Receive maximum Social Security benefits. The Delayed Retirement Credit is an increase of about 8% per year in earnings. If you waited this long to draw, your monthly benefit will be much larger than your age 62 amount would have been.

Age 70 ½ Required Minimum Distributions must begin from retirement accounts. The pre-tax deferral and compounding party that may have begun more than 50 years ago (when you first started working and saving), begins to wind down as you start to draw from that savings pool.

Maybe now you can look forward to your next birthday!

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