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Seven Critical Retirement Deadlines

Retirement

You have spent years working and saving for retirement. As you approach your 50's, there are many important retirement related deadlines that are critical to a successful retirement.   Missing some of these deadlines may result in financial penalties. Make sure to be aware of these seven critical deadlines.

1. Age 50 - Catch Up

Starting at age 50 you can contribute more to your 401(k) or individual retirement account (IRA). In 2018, the catch-up amount maxes out at $6,000 for 401(k)s and $1,000 for IRAs. Indexed for inflation, this amount may increase in future years.

2. Age 59 ½ - Penalty-free Withdrawals

You can withdraw money at 59 ½ from your IRAs without penalty. Employer-sponsored retirement plans, such as 401(k)s, may prohibit this if you are still working, so check first. You still owe income taxes on these withdrawals if the money includes pre-tax contributions.

3. Age 62 - Early Social Security Retirement

Most people become eligible for Social Security retirement or spousal benefits for the first time at 62. Be aware that your payment drops by approximately 30% if you start benefits at 62 and the penalty decreases each year until you reach your full retirement age.

When to take benefits is a tough decision. The options can be a bit complicated. Consult a financial planner if you have any doubts. 

4. Age 65 - Medicare Enrollment

At 65 you become eligible for Medicare. You have seven months to enroll: the three months prior to, the month including and three months after your 65th birthday. Sign up on time. If you file late, you risk permanently higher premiums on Medicare parts B (doctor visits and medical supplies) and D (drugs), a break in health coverage, and potential denial of supplemental coverage. 

If you still working for a company with 20 or more employees and are covered by your employer's health-care plan (or your spouse's employer health plan), you may be able to wait and sign up for Medicare within eight months of leaving your job without penalty.  Please consult the Medicare site  or seek professional guidance before making a decision. 

If you take advantage of Medigap, a Medicare supplement insurance sold by private companies, you must buy a Medigap policy withing 6 months of turning 65 and enrolling in Medicare Part B. After this, you face higher premiums or denial of coverage.

5. Age 66 to 67 - Full Retirement Age (FRA)

Retirees born between 1943 and 1954 can start collecting full Social Security retirement benefits at 66. FRA for those born between 1955 to 1959 increases by two months per year.   Individuals born in 1960 and after reach FRA at 67.

At your FRA, your benefit no longer faces reduction for filing early. In addition, if you still work your income no longer affects your Social Security benefits. 

6. Age 70 - Delayed Social Security Retirement

If you wait until 70 to collect your benefits, your benefit is approximately 30% more than if you take it at your FRA. There is no reason to wait longer to file. Your benefit maxes out at this age.

7. Age 70 1/2 - Required Minimum Distribution (RMD)

When you save pre-tax dollars in a tax-deferred account such as a 401(k) or IRA, the IRS eventually wants to collect those taxes. When you turn 70 ½, the IRS requires you take an RMD, the minimum you must withdraw from your retirement account each year.

You pay income tax on these withdrawals and, if you forget to take your RMD, the IRS imposes a 50% penalty for the amount not taken. For tax purposes, you reach 70 ½ on the date six calendar months after your 70th birthday. You can learn more about RMD's by reading Fintentional's RMD blog.