There are several considerations and milestones that should be considered when planning for retirement. Here is a list of milestones with their significance based on your age and the suggested actions you should take in your retirement plan.
Age 21
An employer-sponsored retirement plan cannot exclude an employee from participating after the employee turns 21years old (and completes the necessary service requirement).
Age 50
You may begin making catch-up contributions up to $7,500 for employer-sponsored retirement plans and IRAs. However, employees who are 60 – 63 years old can contribute an additional $11,250. This is called a “super catch-up” contribution
For 2024 & 2025
- 401(k) (other than a SIMPLE 401(k))
- 403(b)
- SARSEP
- governmental 457(b)
Age 55
An employee who receives a distribution from a qualified plan after separation from service is not subject to the 10% additional tax on early distributions if the distribution occurs in the year of turning 55 or older. There are pros and cons for doing so, but if you are considering such a move, make sure you understand the IRS rules on early distributions.
Age 59 1/2
This marks the stage at which you can begin withdrawing funds from your pre-tax retirement accounts, including a company 401(k) or a traditional IRA, without incurring any penalties. However, keep in mind that the money you withdraw at this point will be treated as taxable income.
Age 62 -65
You have the option to start collecting Social Security benefits starting at the age of 62. It’s important to note, however, that choosing to receive your benefits early results in a permanent reduction, with your monthly payments being approximately 75% of what you would receive at your full retirement age. This decrease will persist for the duration of your retirement, with only cost-of-living adjustments applying, regardless of whether you reach the full retirement age of 66 to 67.
Age 64-64
Enrollment for Medicare opens at age 64, then coverage kicks in at 65. If you’re enrolled in Social Security, you may also consider Medicare supplemental insurance (also known as Medigap) to cover some of your co-pays and deductibles.
Age 66
The Social Security full retirement age for anyone born 1943–1959. You’ll get 100% of your benefit.
Age 67
The Social Security full retirement age for anyone born 1960 or later. You’ll get 100% of your benefit.
Age 70
If you begin collecting Social Security now, you’ll get the maximum benefit, up to 132% monthly benefit.
Age 73
Individuals enrolled in workplace retirement plans, such as a 401(k) or profit-sharing scheme, have the option to postpone their Required Minimum Distributions (RMDs) until the year they retire. This rule, however, does not apply to those who own at least 5% of the business that administers the plan.
- You can withdraw more than the minimum required amount.
- Your withdrawals will generally be considered part of your taxable income, with the exception of any amounts that have already been taxed, known as your cost basis, or those that are eligible to be received tax-free, such as qualified distributions from designated Roth accounts.
Age 75 (Begins 2033)
Starting in 2033, the beginning age for RMDs is 75 for those who turn 74 after December 31, 2032. Another way to look at it is the beginning age for RMDs is 73 for those born from 1951 through 1959 and is 75 for those born in 1960 or later.
The first RMD payment can be delayed until April 1 of the following year, but in that case, a second payment must be taken by December 31 of the same year. The decision to delay the first payment depends on the individual’s financial situation.