Between the ages of 50 and 72, there are many situations that can affect your retirement.  Let’s discuss some of those situations so you can make the best decisions for your future.

You are 50

Play ‘catch up!’  At age 50, you can contribute $6500.00 or more to your 401(k) or 403(b) for a total of up to $26,000 per year.  You can also contribute an extra $1000 to your IRA or Roth IRA for a total maximum contribution of $7000 per year.  

You are 55

Avoid penalties:  Generally, you would have to pay a 10% federal penalty on withdrawals from retirement accounts before reaching age 59½.  The penalty, not the tax liability, disappears on 401(k) and 403(b) withdrawals if you are 55 years of age or older when you quit, get fired, or retire.  This is the ‘separated from service’ rule, and it applies during or after the year you turn 55.  

Turning 59½

Congrats… you can take withdrawals from workplace plans or IRAs without penalty.  Additionally, some 401(k) plans allow workers who are at least 59½  to do an ‘in-service’ rollover allowing you to move that money into an IRA while still working and contributing to your 401(k).  Check with your Human Resources Department to see if this option is available.  Nothing like double contributions. 

You are 60

If you are a widow or widower, this is the earliest age to apply for survivorship benefits from Social Security.  (The age for these benefits is 50 for survivors living with a disability or any age for the survivor who cares for the deceased spouse’s children under age 16 or has a disability).   

You are 62

This is the earliest age to begin to draw Social Security benefits.  If you start this early, your checks will be permanently decreased to the value you receive by taking payments at this age.  Further, you will face an ‘earnings test’ that will decrease your payment by $1 for every $2 you earn working over a certain amount. That amount is $18,960 for 2021.  This ‘earnings test’ goes away when you reach your full retirement age.  

You are 65

You made it!  At this age, most Americans are eligible for Medicare Part A and Part B.  It is typically recommended that you sign up around the 7 months surrounding your 65th birthday.  (The 3 months before the month of and the 3 months after your birthday.)  Delaying can cause you to face lifelong penalties, so watch your dates.  

Turning 66-67

Age 66 is the full retirement age for persons born between 1943 and 1954.  The age rises 2 months for each birth year after that until it reaches 67 years for people born in 1960 or later.  If you can wait to start receiving Social Security payments until your full retirement age, you can avoid receiving reduces checks for the rest of your lifetime.  Evaluate your budget as the reduced check may not be a detriment depending on your anticipated life expectancy and the amount the check is decreased.  

You are 70

If you can delay receiving Social Security payment until you reach age 70, you can increase the payment received.  Every year after you have attained full retirement age, your benefit increases by 8% until you reach age 70.  

You are 72

You are required to begin distributions from retirement accounts at age 72.  Your money has grown tax-free or tax-deferred, but the government is anxious to get some of that investment.   There are exceptions to this requirement.  If you are still working at age 72, you can defer the minimum distributions from your 401(k) or 403(b) until you retire.  You are still required to take the minimum distributions from your IRA if you are still working at age 72 but not from a Roth IRA at any age.  

Excerpted from the Plain Dealer, Section B page 10 from May 22, 2021.

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