Turning 50 or Older? Don't Miss These Critical Retirement Milestones

Most of us would love to enjoy a retirement that allows us to play golf, hang out on the beach, volunteer for worthy causes, spend time with our grandkids, travel to Europe, and do all types of other amazing activities.

But in order to maximize your ability to save on taxes, avoid government penalties and fees, and capitalize on benefits, you'll need to circle a few important dates on your calendar. Here are a few essential deadlines that you shouldn't miss while you're on the road to retirement.

Age 50
Workers age 50 and better can start making catch-up contributions to many retirement plans such as the 401(k), 403(b), and governmental 457(b). In 2014, a worker who is 50 or older can contribute a total of $23,000 into one of these plans, which is a whopping $5,500 above the limit that workers age 49 and under are eligible to save. Likewise, workers 50 and older can contribute an additional $1,000 into their individual retirement accounts, or IRAs, for a total contribution of $6,500 annually. Eligible workers can also make a $2,500 additional catch-up contribution to their SIMPLE IRA or SIMPLE 401(k). Capitalize on these growing limits so that you can maximize your tax deferrals or tax exemptions (depending on whether your accounts are structured as traditional or Roth accounts, respectively).

Furthermore, retiring police, medics, and firefighters can take penalty-free distributions from their plans starting at age 50 if they've completed at least 20 years of service. 

Age 55
This is the earliest age at which you can withdraw money from your 401(k) without paying the 10% early withdrawal penalty if you're no longer in that position and quit after reaching 55. But please note that you can only withdraw the funds from the 401(k) associated with your most recent employer. And you can't withdraw money from your IRA just yet.
 
Age 59-1/2
You can now withdraw money from your IRA without paying the 10% early withdrawal penalty. You can also withdraw money from any 401(k) account, rather than just the retirement account associated with the job you most recently left.
 
Age 62
Congratulations! You are now eligible to collect Social Security payments. But you may want to think twice before you take this step. If you begin collecting Social Security at this early age, your payments may be reduced by up to 30%. 


Age 65
You are now eligible for Medicare. In fact, you can sign up three months prior to your 65th birthday in order to get coverage that begins during the month you turn 65. This is an important deadline to keep on your calendar, because if you don't sign up right away, your Medicare Part B premiums might permanently increase, and it's possible that you may be denied supplemental coverage. Medicare Part B premiums will increase by 10% for every 12-month period that you don't sign up after you become Medicare-eligible. If you're covered by a group health care plan or by a military or veteran's health care plan, talk to your employer or your Department of Defense contact before you sign up for Medicare. 

In addition, historically, those who were born in 1937 or earlier were eligible to receive full Social Security benefits at age 65. Those born from 1938 to 1942 had their full retirement age rise to between 65 and 2 months to 65 and 10 months. But, as you'll see below, those reaching retirement age now have to wait a little longer.

Age 66
If you were born between 1943 to 1954, you're eligible to collect full Social Security payments when you turn 66. If you were born between 1955-1959, your full retirement age spans the range between 66 and 2 months to 66 and 10 months.  

Age 67
If you were born in 1960 or later, your Social Security full retirement age is 67. Remember, though, that your payments will increase by 8% per year every year that you delay collecting benefits until age 70. 
 
Age 70
This is the final year in which you can delay collecting Social Security benefits and still receive that 8% annual increase. If you delay collecting benefits past age 70, you won't collect any additional reward -- so you may as well start collecting the payments now. 

Age 70-1/2
You now must take mandatory distributions from your traditional IRA and 401(k). Talk to your tax advisor about how to calculate the correct amount. This is a critical question, because the tax penalty for failing to withdraw the correct amount is 50% of the amount that you should have withdrawn.  

So, happy (half)-birthday! You now must withdraw some of your hard-earned money. Enjoy it -- after all, you're only 70 once.

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The article Turning 50 or Older? Don't Miss These Critical Retirement Milestones originally appeared on Fool.com.

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Brian Luckhurst

Planning ahead for retirement is essential. I retired from full time employment in March last year but in 2009 we set up our online home exchange travel business to keep us busy in retirement. Since retiring, I have spent part of most days 'working' on our website, developing and marketing it to increase our member numbers.

I would recommend becoming self employed in retirement but it takes much research and do something you enjoy.

Being able to retire for us baby boomers is getting more and more difficult and worrying. Can I also recommend that for those who want to travel, either before or after they retire, that they think about Home Exchange for a vacation. Swapping homes saves money but also provides great travel experiences. Why pay for a hotel room or rent a villa when you can stay for free?

Cheers

Brian

February 17 2014 at 1:10 PM Report abuse rate up rate down Reply