Retirement planning can be confusing. Here are some major milestones on the retirement timeline:
Age 55. If you leave your job after age 55, you can begin taking penalty-free 401(k) withdrawals. Withdrawals from traditional 401(k)s will be taxed as income.
Age 59 ½. IRA withdrawals are allowed without penalty and are taxed as income.
Age 62. Social Security eligibility begins, but your checks will be reduced 25 to 35 percent if you begin claiming at this age. If you are under full retirement age and you work and earn above the annual earnings limit of $15,120 in 2013, excess earnings are deducted from your benefits. If you plan to continue to work, benefits are also reduced by 50 cents for each dollar you earn above $15,120 in 2013.
Age 65. Medicare eligibility kicks in. Beneficiaries may sign up for Medicare Part B during a 7 month window around their 65th birthday, beginning 3 months before the month you turn 65 and ending three months after. It’s a good idea to sign up right away because your Medicare Part B monthly premium increases 10 percent for each 12-month period you were eligible for Medicare Part B, but did not enroll. If you or a spouse are still employed and covered by a group health plan after age 65, you have 8 months to sign up after you leave the job before the penalty kicks in.
Age 66. Baby boomers born between 1943 and 1954 are eligible to receive full Social Security retirement benefits at age 66. For boomers born between 1955 and 1959 the full retirement age gradually increases from age 66 and 2 months to 66 and 10 months. The month you reach your full retirement age, your benefit checks are no longer reduced if you continue to earn income from work.
Age 67. For those born in 1960 and later, the age you can receive full Social Security retirement benefits is 67.
Age 70. Your Social Security benefits further increase by 7 to 8 percent each year you delay claiming up until age 70. After age 70 there is no additional incentive to put off collecting.
Age 70 ½. Those aged 70½ or older must take annual required minimum distributions from retirement accounts. The proceeds will be taxed as income. Seniors who fail to withdraw the correct amount must pay a 50 percent tax penalty and income tax on the amount that should have been withdrawn.
Contact your financial planner to discuss your specific situation.
Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem