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.[1] 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).[1] IRA holders can contribute $7,500 a year to their accounts.[1]
- 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.[1] 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.[2] 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.[3][4] But, in most cases, 59 ½ is the age when you can start to withdraw from your accounts without penalty.[1]
- 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.[1] 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.[1] 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.[1] 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.[1]
[1] https://money.usnews.com/money/retirement/aging/articles/10-important-ages-for-retirement-planning
[2] https://www.investopedia.com/terms/w/withdrawal-penalty.asp#:~:text=Early%20withdrawals%20from%20a%20401,at%20the%20time%20of%20withdrawal.
[3] https://www.irs.gov/retirement-plans/hardships-early-withdrawals-and-loans
[4] https://www.investopedia.com/ask/answers/082515/how-do-you-calculate-penalties-ira-or-roth-ira-early-withdrawal.asp#:~:text=The%20early%20withdrawal%20penalty%20for%20a%20traditional%20or%20Roth%20individual,income%20tax%20and%20the%20penalty.
