In times gone by, 65 was the magic retirement age -- and it is still the magic Medicare age (that is, everyone who turns 65 is eligible to apply for the government health insurance plan called Medicare). These days, however, age 65 is just one marker on the retirement timeline. As Certified Financial Planner Dana Anspach writes for The Balance, "Certain retirement events are triggered at specific ages... As you age, the rules for specific ages change."
Since retirement is a very personal decision, it makes a lot of sense for every Boomer to develop his or her own unique retirement timeline. However, you should be aware of the triggers to which Anspach refers. It is never too early to plan for retirement (or "rewirement," as I like to think of it), but age 55 is the time to "get serious about planning," Anspach writes.
Think of 59-1/2 as the first big trigger in terms of tax implications. That's the age at which you can begin to withdraw from an IRA or 401(k) without an early withdrawal tax penalty. There are a few exceptions, but since tax law is a moving target, you should consult your accountant or the IRS before making any decisions.
Age 62 is the next big trigger. According to the Social Security Administration, if you were born between 1943 and 1954, you are entitled to Social Security benefits as of age 62. Your benefit amount varies depending on your work history; however, if you decide to draw Social Security benefits at this age, you will receive only 75 percent of the monthly benefit to which you are entitled.
Age 65 is important because, as mentioned previously, you can be covered by Medicare at this age. Medicare can be overwhelming -- it has several "parts," and it is not entirely free. Apply several months before your 65th birthday. Get complete information at https://www.medicare.gov/ . Medicare is unrelated to Social Security benefits; in other words, you can be covered by Medicare at age 65 whether or not you have applied for Social Security benefits. At this age, if you were born between 1943 and 1954, you would receive about 93 percent of your monthly Social Security benefit.
Age 66 is the "full retirement age" if you were born between 1943 and 1954. (Full retirement age varies for individuals born after 1954; visit the Social Security Administration website -- https://www.ssa.gov/ -- to learn more.) This is the age at which you can collect 100 percent of your monthly Social Security benefit.
Age 70 is a milestone for many Boomers, and it also is an important trigger. Under current Social Security Administration regulations, this is the magic age at which everyone, regardless of when you were born, gets the maximum "delayed retirement credit" if you have not yet taken Social Security benefits. As an example, if you were born in 1943 or later and you wait until age 70 to collect your Social Security monthly payment, the twelve-month increase to your monthly benefit is 8 percent. That's significant, especially if you live a lot longer! After age 70 there is no increase in your monthly benefit other than COLA, or Cost Of Living Adjustments, if these are enacted by law.
Age 70-1/2 is a trigger but a new law called "SECURE" enacted at the end of last year changed its importance. This age used to mark the end of when you could contribute to traditional IRAs and the beginning of when you had to start taking an "RMD" (Required Minimum Distribution) from an IRA or 401(k) retirement plan to avoid tax penalties. With this new law, you can now continue to make contributions to traditional IRAs even past age 70-1/2 (you could already do so with Roth IRAs and the law doesn't change that). In addition, under the new law, you do NOT have to take an RMD until age 72, as long as turn 70-1/2 in 2020 or later.
Age 72 is a new trigger date, as indicated above. This is the date all those who reach 70-1/2 in 2020 or later must begin taking RMDs from retirement plans to avoid tax penalties. You should consult an accountant and financial planner to fully understand the RMD calculations and tax implications.
These are the primary trigger ages for a general retirement timeline, but you should add any other ages that are important to you personally. I hope you found this helpful -- and not too confusing!
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