Most people view retirement as a long-awaited reward for a lifetime of hard work. While you may have a good idea of what you want to do in your golden years, picking the right time to hang up your hat isn’t always easy.
What to Expect When You Retire at Certain Ages
Here, we’ll consider some of the most important age-related milestones that can affect your retirement plan.
- Age 55. Even if you’ve had a successful career, going into an early retirement could create something of a money crunch. In most cases, you can’t begin taking money from your 401(k) until you’ve reached 59½. However, you can begin withdrawing funds from an employer-based 401(k) on or after your 55th birthday, provided you resign or have been dismissed from work. If you’re looking into an early retirement, you should review the Internal Revenue Service’s guidelines for early distributions.
- Age 59½. Once you’ve hit 59½, you can begin withdrawing money from a pre-tax retirement account without penalty. But do bear in mind: whether you’re taking funds from a 401(k) or a traditional IRA, your disbursals could be considered taxable income.
- Ages 62-64. You can start receiving Social Security at 62. However, turning to Social Security this early can lead to a reduced benefit—most people who retire between 62 and 64 will only be able to receive about 75% of their full retirement benefit. That’s a locked-in rate, too, meaning you won’t be eligible for more money later on.
- Age 65. Prospective retirees are eligible for Medicare once they turn 65. No matter what your retirement plans are or what kind of private health insurance you have, you will likely want to enroll in Medicare—failure to do so can lead to penalties. If you have the money, you may want to purchase a Medicare supplemental plan since standard Medicare doesn’t fully cover the cost of some common procedures.
- Ages 66-67. The “Full Retirement Age” for most Americans currently falls between 66 and 67; your Full Retirement Age, or FRA, is dependent upon your year of birth. Americans born between 1955 and 1959, for instance, attain their FRA when they’re 66, with the exact date similarly dependent on their date of birth. Anyone who was born after 1960 reaches FRA on their 67th birthday.
- Ages 67-70. A late retirement can pay significant dividends, especially for Americans who expect to be more reliant on Social Security benefits. That’s because, after you’ve turned 67, your Social Security benefit will increase by 8% each year until 70. Waiting until 70 can be a smart move for Americans who don’t need Social Security in their late 60s and expect to be in reasonably good health in their 70s and 80s.
- Ages 70-72. If you want to keep working, or simply wish to wait longer before retiring, then there’s some good news: products like annuities and reverse mortgages will continue accruing value. Plus, you’ll have the chance to maximize your social security benefit. However, anyone who turns 70½ after December 31st, 2019, is required by federal law to begin making IRA withdrawals by age 72.
Your Retirement Plan Should Be Holistic
Choosing to retire is no small decision. While going into retirement early can open a whole world of opportunity, it can also see an individual’s Social Security benefits slashed. Similarly, waiting too long to retire may deprive a person of the time needed to enjoy their hard-won reward.
Contact Us Today
One way or another, retirement should be a personal choice base on your unique financial needs, dreams, and aspirations. If you’re nearing retirement age or simply aiming to think ahead, a wealth management attorney can help assess your circumstances to create a customized retirement plan. You may be surprised to learn how you can benefit from retirement savings accounts and techniques, whether you’re just learning about IRAs or already have a robust investment portfolio.
If you want to get a head start on planning responsibly, send us a message or call us today at 870-275-4304.