Retirement planning is more of a marathon than a short sprint. To make sure you are hitting your time, you need to keep pace and have checkpoints to keep you accountable.
Just like a marathon, there are important milestones in financial planning that can guide your retirement strategy. Making these choices and meeting these milestones in a timely manner may impact your financial independence in retirement and failing to do so can result in hefty government fines and taxes.
Explore these important retirement milestones to be sure you are maximizing retirement investments and benefits.
The idea that ‘proper planning prevents poor performance’ is key when it comes to preparing for your retirement. Here are retirement planning milestones you don’t want to miss.
At 50 years old you can now put away more into your retirement plan. In 2019, taxpayers over the age of 50 can put away an additional $1,000 for your IRA and an additional $6,000 for your 401(k), 403(b) and most 457 plans, beyond the employee elective deferral limits.
At the age of 59½ you can now take withdrawals from your IRAs and 401(ks)s with no penalty. You will still need to pay taxes on withdrawals from a traditional IRA or 401(k) but you will not be charged the 10 percent early withdrawal penalty after 59½.
62 years old is the earliest age that you can claim Social Security retirement benefits. However, collecting Social Security at this age comes at a cost. If you collect now, before you reach your full retirement age, you will have a reduction in benefits that will last the rest of of your life. In fact, claiming benefits early can reduce your benefits by 6.67 percent for up to 36 months and then 5 percent moving forward. For a widow or widower, one can receive Social Security benefits at age 60 and if there are eligible children, the widow or widower can receive benefits at any age.
At age 65, you are now eligible for Medicare, even if you are not yet collecting Social Security. It’s crucial to apply for Medicare during your initial enrollment period which is three months before turning 65 and ends three months after you turn 65. Failing to sign up during this initial enrollment period could cause your Part B premium to increase 10 percent for ever 12-month period in which you do not sign up for Medicare.
At age 70, you have reached the maximum eligible Social Security retirement benefit. If you have waited to collect retirement benefits, you’ve now earned delayed retirement credits and if you were born in 1943 or later, you earn 8 percent of delayed retirement credits for each full year until age 70. You must begin taking benefits now.
This is the year required minimum distributions being. You must withdraw each year from your retirement accounts, including traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as any employee retirement plans. You must withdraw a portion of the funds in your account and you must pay income taxes on those withdrawals. If you fail to withdraw the required minimum distribution, the amount not withdrawn can be taxed at 50 percent.
If you are concerned about navigating your retirement strategy and hitting these important retirement planning milestones, reach out to fiduciary financial advisor who can help you develop a sound financial plan and help you avoid unnecessary penalties through retirement.
With our trusted network of advisors, we’ll connect you with up to three established planners in your area.
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