You achieve a lot of milestones in your youth. Of course, there is also your first birthday, and also the one when you turn 10 (finally double-digit!). You are a teenager at the age of 13. At 16, you’re probably thinking about driving. At 18 you can vote; with 21 you can enter the bars.
You’ve reached a bunch of milestones later in life, and many of them have to do with retirement. Knowing these age milestones can help you better prepare for life after work. They contain:
It’s time to catch up! People over the age of 50 can contribute $ 6,500 each year for their 401 (k) or 403 (b), for a total contribution of up to $ 26,000 this year. Those aged 50 and over who contribute to IRAs and Roth’s IRAs can invest an additional $ 1,000, for a total maximum annual contribution of $ 7,000.
Usually people have to pay a federal penalty of 10%, along with income tax, when they withdraw money from a retirement account before the age of 59. The penalty (but not taxes) disappears by withdrawing 401 (k) and 403 (b) if you are 55 or older when you leave, retire, or retire. This “separate from service” rule applies during or after the age of 55.
At this age, you can withdraw money from workplace plans or IRAs without penalty. Also, some 401 (k) plans allow workers who are at least 59 ½ to make a rollover “in service”, allowing you to move money to the IRA while you are still working and contributing to 401 (k). If you are interested, contact your 401 (k) plan provider or human resources department to see if this option is available to you.
For most widows and widowers, the age of 60 is the earliest of those who can start social security. (Survival benefits are available from the age of 50 for survivors living with a disability, or at any age if the survivor is caring for the deceased spouse’s children who are under 16 or incapacitated.)
This is the earliest age at which you can start retirement or social security benefits, but your checks will be permanently reduced if you start before the full retirement age, which ranges from 66 to 67 years. Also, you will face an earnings test that reduces your take $ 1 for every $ 2 you earn over a certain amount, which in 2021 is $ 18,960. The earnings test disappears when you reach full retirement age.
At age 65, most Americans are eligible for Medicare, the government’s health care program. You usually want to sign up in the seven months around your birthday – which means three months before the month you turn 65, the month you turn 65, and three months after. Delaying after that point can lead to you paying permanently increased premiums. An explanation of Medicare’s details and shortcomings is beyond the scope of this column, but you can learn more at medicare.gov or by calling Medicare at 1-800-MEDICARE (1-800-633-4227) and requesting the “Medicare and You” Handbook.
TURN 66 to 67
The full retirement age is 66 for people born between 1943 and 1954. The age increases by two months for each year of birth thereafter, until it reaches 67 for people born in 1960 and later. Waiting at least until the full retirement age to receive Social Security benefits means you won’t have to settle checks that are reduced because you started early or because of earned income.
Juicy benefit awaits those who can delay the start of social security after the full retirement age: Their benefit increases by 8% per year until it reaches a maximum at the age of 70. Not only does this mean more money for the rest of your life, but if you are bigger who earns in a couple, it also increases the family allowance for your spouse.
Most pension plan contributions reduce taxes in the year you pay them, and your account relieves you of the tax over the years. But in the end the government wants its cut. You must start taking at least the minimum amount from most retirement plans starting at age 72 (The required minimum distributions started at age 70 ½, but this has been moved.) There are a few exceptions. If you continue to work, you can wait until you withdraw to start the minimum distribution from your 401 (k) or 403 (b). Minimal distributions are still required from traditional IRAs, even if you work. However, if you have a Roth IRA, you will not have to start distribution at any age. If you leave the money to the heirs, they will have to start raising money.
Liz Weston is a NerdWallet columnist, certified financial planner and author of Your Credit Score. Email: email@example.com. Twitter: @lizweston.