There are many important birthdays when it comes to retirement planning. So, as you approach your retirement, it’s crucial to have a few of these in mind as key milestones. Here are 4 important birthdays to make note of as you set up your financial future:
- Catch-Up Contributions Begin at Age 50
When you reach age 50, you can contribute more to your retirement accounts than you were able to when you were younger. In 2023, 401(k) contributors who are age 50 and up can contribute $30,000 to their account ($7,500 over the normal limit for contributors 49 years old and younger). IRA holders can contribute $7,500 a year to their accounts.
- 59 ½ is when you can take penalty-free withdrawals
Most retirement accounts will allow you to take penalty-free withdrawals when you reach 59 ½ years old. If you try to withdraw from an account before then, you will likely impose at least a 10% early withdrawal tax in addition to any other tax requirements the withdrawal may incur. There are some accounts that will allow you to withdraw some of your money without a penalty before you are 59 ½, and you can apply for hardship withdrawal to get some of your money without a penalty before you are 59 ½. But, in most cases, 59 ½ is the age when you can start to withdraw from your accounts without penalty.
- At 62, you can start to claim Social Security
Deciding when to claim Social Security is a complicated topic, but the earliest you can claim is at 62 years old. Because you are not considered to be at “full retirement age” at 62, you won’t receive the full value of a Social Security claim, and your payouts for the rest of your life will be reduced. But you can begin to claim at 62 if that fits into your financial plan.
- Medicare eligibility starts 3 months before you turn 65
You will be able to enroll in Medicare starting 3 months before you turn 65. You will have 7 months total to decide where to enroll: 3 months before you turn 65, the month of your birthday, and 3 months after your birthday.
Retirement has many moving parts and many important dates that should factor into a full pre-retirement timeline. If you realize you don’t have a comprehensive pre-retirement timeline planned out, reach out to one of our professionals today for a complimentary review of your finances.