10 Important Retirement Planning Deadlines
Retirement. It conjures up images of beaches and relaxing after years of hard work. Now you can collect Social Security and Medicare and qualify for an extra few benefits of being a senior citizen.
Nothing in the world to worry about. Well, except deadlines. Cutoffs, that could cost you higher taxes, penalties and fees.Make sure you factor in these dates in your retirement planning:
Age 50: Now that you have hit the half century mark you can sock away more money in your 401(k) and IRAs. If you are over 50 you can defer $23,000 in your 401(k) and $6,500 in your IRA or Roth IRAs in 2013.
Age 55: If you retire, quit or get tossed from your job in the year you turn 55 or later, you can access your 401(k) penalty free. I also recently learned that Public Safety employees can take their benefits at age 50 or later and avoid the 10% penalty.
Age 59 1/2: This is the age where the 10% early withdrawal penalty disappears. Don’t forget, no penalty but income taxes still apply on IRA and 401(k) withdrawals.
Age 62: This is the earliest age for Social Security eligibility. Keep in mind your payments will permanently be reduced by as much as 30% if you go for it early. In addition, if you work and collect Social Security benefits at the same time, you could be subject to part or all of your payments being temporarily withheld.
Age 65: Time for Medicare! You can sign up as early as 3 months before your 65th birthday. If you don’t sign up right away, Medicare Part B and D premiums could permanently increase. Your monthly Part B premiums will increase by 10% for each 12 month period that you wait. You also have a six-month enrollment period for Medigap where you can pick any policy your state has to offer. Once this period ends, you could be denied coverage or face higher costs. New Medicare enrollees are eligible for a free preventative care doctor’s visit during the first 12 months they have Medicare Part B.
Age 66: Attention baby boomers born between 1943 and 1954, you will be eligible for full Social Security payments at this age. At FRA (full retirement age) you can work and earn as much as you want without any reduction in benefits.
Age 67: Well, since I was born after 1960, this is the age for my full retirement and Social Security benefits. If you are 53 or younger, you have to wait until 67 thereby avoiding the earnings limit.
Age 70: Age 70 is the last year that you will get that 8% increase in your Social Security benefit if you have delayed signing up. So no benefit to waiting any longer. Get to the local Social Security office.
Age 70 1/2: At this age you are required to withdraw money from traditional IRAs and 401(k)s, and you must pay income tax on each withdrawal. Plus, if you don’t there’s a hefty 50% penalty on the amount you didnt withdraw. If you are still working past age 70 1/2 you can delay distributions from your current 401(k), but not IRA, until April 1 of the year after they retire (unless they own 5 percent or more of the company sponsoring the plan). People age 70 1/2 and older are also no longer eligible to get a tax deduction for traditional IRA contributions.
These dates are pretty easy to keep track of. For most of us you only have the full retirement age based on your year of birth, and all of us have to withdraw money at age 70 1/2. Do you have one or more of these retirement planning deadlines approaching? If so, write me at david@lexwealth, or call me at (859) 225-2595.