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Key Retirement Planning Ages

By Justin Pritchard, CFP®

Planning for retirement is a lifelong affair. While there’s no official retirement age, several milestones can impact your finances. For example, when reaching certain ages, you might qualify for new opportunities, or you might need to take action to maximize your benefits.

Start With Zero

Before we fast forward to your 50s, let’s remember that it’s never too early to start saving for retirement—or help somebody else prepare for retirement.

The IRS sets rules on when you can contribute to retirement accounts, but if you have earned income, you may be able to use Roth IRAs and other retirement accounts. You may also need to find an IRA provider that allows an adult to open an account for a minor. But there are plenty of stories of minors who earn income (sometimes in creative—but legal—ways) and parents who set the funds aside for the child’s future.

By getting an early start, you allow more time for compounding, potentially making it easier to build a sizable nest egg.

Age 50

Higher Contribution Limits

Retirement accounts like IRAs, 401(k) plans, and 403(b) plans have restrictions. To get the tax benefits of contributing to those accounts, you must add funds before a deadline, and the maximum amount you can contribute is limited.

Once you reach age 50, you may be able to contribute more. Catch-up contributions enable you to boost your savings toward the end of your career, when cash flow might be easier to manage.

Selected limits for 2022:

  • 401(k), 403(b), most 457 plans: $20,500
  • Traditional and Roth IRAs: $6,000
  • Other plans have different limits, and employers may make additional contributions (profit-sharing or matching, for example)

Catch-up contributions:

  • 401(k), 403(b), most 457 plans: $6,500
  • Traditional and Roth IRAs: $1,000

Early Withdrawals for Some Workers

Some public safety workers, such as qualifying firefighters employed by the federal government, get early access to retirement savings at age 50. If you qualify, you can potentially avoid early-withdrawal penalties on distributions from a workplace retirement plan.

Age 55

For most workers, age 55 provides an opportunity to (potentially) take penalty-free withdrawals from a workplace plan—assuming you leave your job after age 55. That can be helpful if you need cash for living expenses or projects. While you may still need to pay income tax on withdrawals, avoiding the additional 10% penalty on early withdrawals may be helpful.

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Age 59.5

At age 59.5, early-withdrawal penalties are avoidable for withdrawals from pre-tax retirement accounts. That includes traditional IRAs, pre-tax 401(k) and 403(b) plans, deferred annuities, and other types of accounts.

Those with 457(b) plans have an advantage, although it’s often wise to leave money untouched for as long as possible. Distributions from governmental 457(b) plans often qualify for penalty-free treatment, regardless of your age.

Age 62

For most people, 62 is the earliest age to begin taking Social Security retirement income. This is also known as “early” claiming.

While it might make sense to claim early, doing so results in a reduced monthly benefit. For example, if your full retirement age (FRA) is 66.5, you might see a reduction of 27.5%. Put another way, every $1,000 of income will turn into just $725. That reduction lasts for the rest of your life, and it could affect a surviving spouse who takes over your benefit.

In some cases, it makes sense to claim early, and you can choose to claim somewhere between age 62 and your FRA if that’s what’s best.

Age 63

Your Medicare premiums are based on your modified adjusted gross income from two years ago. Once you’re 63, you’re within two years of Medicare, so it’s time to start thinking ahead.

For example, if you’re doing Roth conversions or you have other ways of controlling your taxable income, it’s smart to run some numbers carefully as you reach this age.

For example, a single taxpayer in 2022 pays premiums based on their 2020 income. Your Part B premium is $170.10 per month with an income of $91,000 or less. But above that, the premium changes to $238.10 with an Income Related Monthly Adjustment Amount (IRMAA) charge. That might be an increase you’re willing to accept, but it’s crucial to know what you’re getting into.

Age 65

Most people are eligible to enroll in Medicare at age 65. It’s critical to enroll on time because you may face a lifetime penalty for late enrollment. To be safe, you can begin the process three months before your 65th birthday, which is probably an excellent idea.

If you’re still working and you have health care through your job as you approach age 65, speak with your benefits department and your insurer to learn what steps to take.

Ages 66 Through 70

Your full retirement age (FRA) for Social Security benefits is likely between age 66 and 70. At that age, your monthly income does not get reduced for early claiming, and earnings from work (if you’re not really retired) no longer cause deductions from your benefit payments.

If you wait to take retirement income from Social Security, your monthly income increases at a rate equivalent to 8% per year. Any inflation adjustments (or COLA) will be based on that higher amount, so this can be beneficial.

Once you reach age 70, those “delayed retirement credits” no longer impact your benefit, so you don’t need to wait beyond 70.

Age 70.5

Age 70.5 used to be the threshold for starting required minimum distributions (RMDs) from pre-tax retirement accounts, but the SECURE Act changed that. However, 70.5 is still relevant in limited circumstances. If you want to make qualified charitable distributions (QCDs) from a retirement account, you can do so after age 70.5.

QCDs allow you to give money directly to a qualifying charity instead of taking possession of the funds. When used correctly, you can exclude those distributions from your taxable income, which can make it easier to minimize income.

Age 72

Again, the SECURE Act raised the age for starting RMDs to 72 (for those reaching 70.5 after 2019). After reaching age 72, you generally must begin withdrawing funds from pre-tax retirement accounts.

Technically, you may have until April 1st of the year following the year in which you reach age 72 to take your first distribution (with subsequent withdrawals having a year-end deadline). Yes, that’s more complicated than it needs to be. Plus, if you’re still working for a company that you don’t have a meaningful ownership interest in, you might be able to delay RMDs from a 401(k) plan. However, for many people, 72 is time to start thinking about RMDs.

This is important because the penalty for missing an RMD is steep. If you don’t take out the required amount, you face a penalty of 50% of the amount you were supposed to withdraw.

Other Rules

These ages apply primarily to tax rules and government programs. But you might have other retirement benefits available. For example, if you get a pension from an employer, that retirement plan might have different milestones.

Important: The information on this page can help you start thinking about retirement. But tax rules are complicated, and they change over time. It’s critical to triple-check everything with your tax preparer, a CPA, and/or a financial planner who is familiar with your goals and your circumstances. This article may be missing information, it may be outdated, or it could contain errors or information that is not relevant to your situation. Do yourself a favor and conduct additional research before making any decisions.

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