Important dates and ages for retirement planning

Planning for retirement takes center stage for most boomers today.  While saving, reducing spending and debt, and planning how you will spend your time are important, knowing what events take place at key ages will help manage expectations.  Here are a few key dates.

Age 55:  If separated from service, participants may access funds in a 401k without a 10% penalty. This is important for people out of work in their early to mid-50s. If a person has already rolled his or her money over to an IRA, he or she could look at completing a 72t distribution, which avoids the penalty, but he may take more than needed.

59.5: Most account holders know about accessing tax-deferred and Roth IRA money without any tax penalty at 59.5.  The Roth needs to have been open for more than five years. If not, the owner has access only to the contributions with no tax or penalty.  Keep in mind that money taken from the deferred tax bucket will still face normal income taxation.

62: Early social security benefits.  What sounds better than hanging up the professional life and getting an income early?  Ah, wait a second, it will cost you.  For most boomers, it is about 8% per year, a nice return for portfolios these days.  Think twice before electing for this alternative.

65: Medicare eligibility; make sure you sign up in advance.  The number for the Social Security Administration is 800-772-1213.  Keep in mind while part A does not cost you, part B premiums are deducted from your Social Security payment if you are drawing Social Security at the time you start receiving a benefit.

66-67: For most of us, this will be full retirement age to start receiving Social Security. Participants who delay benefits until the age of 70 will see an increase in their monthly benefit.

70: The age at which you must start taking Social Security.

70.5 or April 1st of the year in which one reaches 70.5: Welcome to required minimum distributions.  The IRS mandates that qualified account owners take out a required minimum distribution at the age of 70.5 or by April 1st of the year following in which one reaches age 70.5.  Keep in mind that the latter will cause two required minimum distributions in one year.

Here is an interesting observation: note the age of 70.  People start taking Social Security as a requirement, and must take required minimum distributions. As much as 85% of Social Security income may be taxable.  This acts as an annuity for the government.  Coincidence?  I don’t think so.

By understanding these key ages, baby boomers will be able to coordinate income sources to help maximize lifetime benefits and reduce taxation.

Contact me at 317-805-0840 or by email at to create a tax-efficient retirement income.