Age is something to celebrate
when you remember these key dates.
While you may think
you’ve passed most of
life’s major milestones
by the time you reach your 50s,
think again. From 55 on, there
are a number of key dates you
can’t afford to ignore. Miss them
and you’ll not only miss some
of the perks that come with
getting older, but you may also
be penalized.
So before you declare
that you’ll never acknowledge
another birthday, at least
put these ages on your
mental calendar.
Age 55 - Possible penalty-free
early 401(k) distribution
If you’re 55 or older and lose or
leave your job, you can take a
distribution from your 401(k)
without paying a 10% early
withdrawal penalty under
what’s called “separation
from service.” If you do this,
remember that you will still
have to pay income taxes on
the distribution.
AGE
59½ - Penalty-free withdrawals
from any of your
retirement accounts
Whatever type of retirement
account you have—IRA, 401(k),
403(b), SEP, SIMPLE, you
name it—you can begin making
withdrawals penalty-free at
age 59½. However, you’ll pay
income taxes on the earnings
and any contributions that were
tax-deductible.
In the case of a Roth IRA,
contributions and earnings can
be withdrawn tax- and penaltyfree
if you’ve held the account
for at least five years.
AGE
62 - Early Social Security
benefits
This is the earliest you can
begin collecting Social Security
(unless you’re disabled).
However, this may not be
the wisest choice because
it triggers a permanent reduction in your benefit of
approximately 25%. Plus,
your benefits will be further
diminished if you’re still
working and earn beyond a
certain limit.
Visit the Social Security
Administration’s website
or stop by your local Social
Security office if you need help
determining the best time to
start collecting benefits.
AGE
65 - Eligible for Medicare
If you’re already receiving
Social Security, you’ll be automatically
enrolled in Medicare
parts A and B at 65. If you’re
not collecting Social Security
benefits yet, you’ll need to
apply for Medicare.
Ideally, you should apply for
Medicare three months before
the month you turn 65. You can
visit your local Social Security
office, call them at 800-772-1213,
or apply online.
AGE
66–67 - Full retirement age
You can begin collecting full
retirement benefits when you
reach what the IRS designates
as “full retirement age” (FRA).
For Boomers and younger,
FRA ranges between 66 and
67, depending on when you
were born.
At your FRA, you get full
benefits even if you continue to
work. However, if you delay filing,
your benefits will increase
by 8% each year until age 70.
AGE
70 - No further increase in
Social Security benefits
If you delay collecting Social
Security, the 8% annual
increase stops when you reach
age 70. There’s no reason to
further delay taking benefits—
you’ve earned them!
AGE
70½ - Required minimum
distributions (RMDs)
At this age, you’re required to
begin taking withdrawals from
your tax-advantaged retirement
accounts, with two exceptions:
• You can delay RMDs on your
401(k) if you’re still working.
• You’re never required to take
distributions from a Roth IRA
if you’re the original account
owner or if you inherited the
account from your spouse
and treat it as your own.
RMDs are determined
by a formula based on life
expectancy and the amount
you have in tax-advantaged
accounts. Schwab can calculate and distribute your RMDs for
you, or you can use our online
calculator to do it yourself.
Your RMDs must be taken
by December 31 each year,
with the exception of your first
RMD, which can be delayed
until April 1 of the year after
you turn 70½. Be aware that if
you delay your first RMD until
the following year, you must
still take your second RMD
by December 31 of that year.
Taking your first and second
RMD in the same year could
increase your annual income
enough to bump you into a
higher tax bracket.
- By Carrie Schwab-Pomerantz, Charles Schwab, OnInvesting, Spring 2013
No comments:
Post a Comment