Top 7 Retirement Milestones You Need to Know

After age 70, there's no advantage to delay filing for benefits.

Time is Money
Getty ImagesYou can't turn back the clock, but you can prepare for your retirement future.

By Kelly Campbell

Retirement planning is a process that actually continues throughout your retirement years, with tweaks and changes to ensure that you stay on track. Many folks will immediately think of their portfolio and rate of return, but your age is also an important factor that can help you maximize certain benefits, while helping you avoid mistakes, which are often accompanied by hefty penalties. Make sure to mark your calendar for these important milestones.

In order to help illustrate these points, we'll use the example a fictional 49-year-old named Claire, who was born in 1965. Claire is still putting in hours at the office, but her children are in college and she's starting to think more seriously about her retirement. Let's examine how these retirement milestones work for Claire and many others years away from retirement:

Age 50. Once Claire reaches age 50, she's eligible to take advantage of something called the "catch up" provision, meaning she can make greater contributions to her qualified retirement accounts (individual retirement accounts, Roth IRAs, 401(k)s, etc.). Claire is now able to contribute an extra $1,000 to her IRA and Roth IRA, increasing her total contribution from $5,500 to $6,500 annually. If able, she can also add an extra $5,500 to her 401(k), increasing the contribution limit from $17,500 to $23,000 annually. It's important to take advantage of this provision, if you weren't able to start saving for retirement as soon as you would have liked.

Age 59½. One of the good things about getting older, aside from getting wiser, is that Claire will be able to access her retirement savings. Age 59½ allows individuals to avoid the 10 percent "early withdrawal penalty" if an unplanned event or illness occurs. However, income tax is still assessed on traditional 401(k) and IRA withdrawals, while withdrawals from Roth-optioned accounts are tax-free if held in the account for more than five years. It's important to understand the differences between Roth and traditional accounts and assess the advantages of one over the other.

Age 62. This is the earliest age that Claire is eligible to file for Social Security benefits, but there is a catch. If Claire files for Social Security, as soon as she turns 62, then she will only be eligible to receive 70 percent of her total benefit. Also, should she decide to file and continue to work, her benefits could be partially or entirely withheld and taxed. However, if she continues to work and files for Social Security, once she has reached her full retirement age of 67, then she will receive her full retirement benefit, regardless of income.

Age 65. Once Claire turns 65, she is eligible to enroll in Medicare. This means that she no longer has to rely on employer-sponsored or private health insurance plans. An important point to remember is that filing for Social Security doesn't automatically include enrollment in the Medicare program. Claire will need to register for Medicare benefits during a 7-month window, including the three months before her 65th birthday, her birth month and three months after, to avoid possibly paying higher premiums for coverage.

Age 66 and 67. For the majority of baby boomers (born between 1943 and 1954), the retirement age will be 66. For Claire, because she was born after 1960, her full retirement age is 67, which means that she is now eligible to receive her full retirement benefit. Should Claire decide that she wants to claim her benefits at age 65 and not wait until her full retirement age of 67, then, according to the Social Security Administration, she will receive about 87 percent of her total benefit.

It's important to note as well, that spousal benefits are also affected by the decision to receive benefits early. A spouse may claim 50 percent of the higher earner's benefit. So if Claire, having the higher earnings record, decides to file at 65 and not 67, and receive a reduced benefit, then her spouse would receive 50 percent of her reduced benefit.

Age 70. If there is a penalty for drawing Social Security benefits early, there must be an advantage when you delay receiving benefits, right? That's correct. For every year that Claire delays drawing her Social Security benefit, she receives a "Delayed Retirement Credit," which is an 8 percent annual increase to her accumulated Social Security benefits. Claire decides to work a couple more years and not file for Social Security at 67, so she can receive that 8 percent increase. However, she is only able to receive the delayed retirement credit until age 70. After age 70, there isn't any advantage to delay filing for benefits.

There are numerous strategies and ways to file for Social Security and depending on your specific situation, you want to develop a filing strategy that will substantially increase your benefits over your lifetime. I strongly recommend that people do their research and develop a filing strategy that ensures receipt of the maximum benefit.

Age 70½. Once Claire reaches age 70½, she is required to begin taking required minimum distributions from her traditional retirement accounts, or she will have a 50 percent tax penalty on the amount that should have been taken out. That's a pretty substantial fine by the Internal Revenue Service. Where else can one be penalized for continuing to save money? Scheduling and taking required minimum distribution withdrawals is one of the most important things that retirees must remember to do.

Until this point, Claire's traditional qualified retirement accounts have grown tax-deferred. She has only paid taxes on money withdrawn. However, she can't keep money in her retirement accounts indefinitely, because the function of these accounts is to provide income during retirement. Required minimum distributions are a way to ensure that the government is able to collect tax revenue on the tax-deferred dollars that are held in these accounts. Required minimum distributions do not apply to Roth-optioned retirement accounts, which is a great advantage of Roth accounts.

I hope that this quick overview of significant retirement milestones, illustrates the importance of factoring your age into your retirement planning.

Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment adviser in Alexandria, Virginia. Campbell is also the author of "Fire Your Broker," a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisers abandoned their responsibilities to help them weather the storm.

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don't be foolish and fall into the trap of trying to measure your wealth by the value of your assets. Markets change. Valuations fluctuate. Instead, measure your wealth by the amount of cash flow your assets consistently generate.

I would look at doing these 7 things:

1) Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen everyday for a couple of years, do it. If you want to buy a car, get a reliable beater. Get insurance for $25/month from Insurance Panda. Forget about buying a house until your debts are paid off.

2) Once you are out of debt, stay out of debt. The only exception to this rule is a vehicle and a house. If you want to get a nicer car, buy used and be able to pay it off in a year or 2.

3) If you are going to stay in the same spot for at least 10 years, buy a house, preferably with at least a little bit of usable land. An acre is good, 5 acres is better. Take the amount you are pre-approved for and cut it in half - that's how much you should spend on a house. Come to the table with at least 20% down and make a couple of extra mortgage payments every year. If you're going to be transferred or relocate every 5 years, forget about buying a house and rent instead.

4) Develop multiple revenue streams. Do contract work. Start a business on the side. Invest in a business as a silent partner. Raise chickens, breed dogs or grow apples. Build websites. Buy and sell antiques. Acquire rental property. Sell something that generates residual income. Learn to play the currency markets or trade stocks. Do whatever you can to generate income from multiple sources.

5) Grow these multiple revenue streams to the point that they generate enough consistent and reliable cash flow to replace your current income.

6) Make as much as you can. Save as much as you can. Give away as much as you can.

7) Retire!- the sooner, the better. Be sure you understand that "retirement" doesn't necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.

July 22 2014 at 1:56 PM Report abuse rate up rate down Reply

Sounds great, except for one thing: at her age, "Claire" is lucky to have a job! There are many of us who are younger than "Claire" but because of our age, cannot get hired! I can't wait till I'm 62, I'm taking the money and running!!!

July 16 2014 at 9:48 PM Report abuse +2 rate up rate down Reply

Wow, korrection are you way off base. Now people, if you are on social security and medicare thank a democrat. If you want to end these 2 fine programs vote republican. The reaction to Obamacare from the republicans is just like the reaction in 1935 towards social security and 1968 same thing towards medicare. The republicans in congress is way off base and should be replaced. They are following the tune of the big money machine of the republicans and have forgot how to think for themselves on what is good for America not the GOP.

July 16 2014 at 12:04 PM Report abuse -3 rate up rate down Reply
1 reply to toosmart4u's comment


July 16 2014 at 3:49 PM Report abuse -1 rate up rate down Reply
worried man

The laws need to be changed for savings! especially for IRAs. We are being told that we may live to be 90 but the amounts we have to pay taxes on go up much earlier than that. With withdrawl amounts hitting their maximim way before 90 we could be broke. Granted you can move that money into a Roth but most of us will be so senile we will be lucky to even know who we are as we get older.

July 16 2014 at 11:52 AM Report abuse +3 rate up rate down Reply

no one will be able to retire any time, until this muslim clown is removed from our white house in handcuffs along with all his trash in 2014, as he taxed the hail out of all middle class n gave himself n senate raises !!!!

July 16 2014 at 11:30 AM Report abuse -5 rate up rate down Reply

As important or possibly even more important then the financial milestones are the retirement lifestyle milestones you would like to achieve: spending more time with family, traveling, volunteering, starting your own business, engaging in new hobbies,etc. I read several great guest posts on the site Retirement And Good Living by boomers and recent retirees and what they are doing during their retirement. Some are working part time, starting businesses based on hobbies, sailing full time, RVing, volunteering with the Peace Corps, retired overseas and more. It give you a good perspective of the possibilities.

July 16 2014 at 8:54 AM Report abuse +3 rate up rate down Reply
1 reply to j79xjames's comment
worried man

sounds great if you have the health and energy.

July 16 2014 at 12:09 PM Report abuse +4 rate up rate down Reply