In your early working years, you probably aren’t thinking much about your retirement. You are working hard, trying to support a family, maybe paying down debt, paying off student loans, etc. As you arrive into your 40s or 50s, however, the thought of an eventual retirement starts to become more real.
There are a few key ages to keep in mind as you get closer to retirement:
- Age 55
Despite the fact that many people think about retirement beginning at age 65, you will be pleasantly surprised to find out that you may withdraw retirement plan savings without penalty if you leave your job or retire at age 55! If you are a diligent saver and early retirement is the goal, this provision of the law will work in your favor. Talk to your financial planner to see how this might factor into your overall retirement plan. This only applies to the 401k or retirement plan from the employer you are leaving, and not all retirement accounts, and there could be some other restrictions so be sure to talk to a professional for more details.
- Age 59½
You may withdraw money from qualified plans/IRAs without IRS penalty, as long as the plan allows. This includes accounts such as your 401(k), Traditional IRA, and other tax-deferred retirement plans. If you try to withdraw money out of those accounts before age 59 ½, you could be hit with a 10% early withdrawal penalty unless the withdrawal counts for an exemption such as financial hardship.
- Age 62:
Age 62 is a big one because this is the earliest age when you may begin collecting Social Security. Keep in mind, however, that just because you can doesn’t mean you should. Social Security payout increases the longer you wait to start withdrawals. For example, if you turn age 62 in 2023, your benefit would be about 30% lower than it would be at your full retirement age of 67. Talk to your financial advisor to determine the best time to start withdrawals. There are many factors to consider, and there is no one-size-fits-all approach.
- Age 65:
Hooray! You are now entitled to Medicare coverage. Many people see age 65 as a magic number because not only is this the traditional age people target for retirement, but it is also the age people can begin Medicare. This is a great time to connect with an independent insurance agent who can help you identify a plan with the type of coverage you need.
- Ages 66–67:
The Social Security full retirement age, depending on when you were born.
As mentioned before, Social Security benefits grow the longer you wait to start with withdrawals. At this age, you are at full retirement age and can receive much higher monthly Social Security benefits than you could when you first became qualified.
- Age 70:
The latest age to start receiving Social Security benefits.
At age 70, you have reached the maximum amount of benefits that can be paid out, and you might as well begin taking the withdrawal even though you might not need it right now. Delaying it beyond age 70 rarely (if ever) makes sense.
- Age 73:
The new age increase for 2023, this is the year in which you must start required minimum distributions (RMDs) from your retirement plans. This means you have to withdraw the money out of the account and spend it, donate it, etc. There are options here, so we’d encourage you to reach out.
Thanks for reading. We hope this has been informative!