Ah…retirement. After years of work, it’s a time for you to relax and enjoy spending your time as you wish. Not so fast. Retirement ushers in some pretty important deadlines, some that carry penalties if you’re not paying attention. To keep you on track, here are 7 critical retirement deadlines you need to know.
(View 7 Critical Retirement Deadlines on WTOP.com.)
- Age 50 – Catch Up: Starting at age 50, you can contribute more pre-tax dollars to your 401k or IRA. In 2014, the maximum “Catch Up” amount is $5,500 for 401ks and $1,000 for IRAs. This is indexed for inflation so it may increase in future years.
- Age 59 ½ – Penalty Free Withdrawals: You can withdraw money from your Individual Retirement Accounts (IRAs) without penalty. Employer-sponsored retirement plans, such as 401ks, may have prohibitive rules so you’ll want to check first. You will still owe income taxes on these withdrawals if the money included pre-tax contributions.
- Age 62 – Early Social Security Retirement: For most, this is the first time you become eligible for Social Security retirement or spousal benefits, but beware – you’ll receive a permanently reduced payment by as much as 30% if you start to receive benefits at 62 before your full retirement age. It’s a tough decision, but you can find a helpful guide here: Social Security Guide
- Age 65 – Medicare: You are now eligible for Medicare and it’s important that you sign up on time. You have seven months to enroll – the three months prior to, month including, and three months after your 65th birthday. If you’re late, you risk having permanently higher premiums on Part B and D, a break in coverage, and potentially being denied supplemental coverage. If you’re still working and covered by your employer’s health care plan (or spouse’s employer health plan), make sure to sign up for Medicare within 8 months of leaving the job to avoid a break in coverage, otherwise you could face higher premiums and penalties. Lastly, if you decide to take advantage of Medigap, you have a 6-month window to buy a Medigap policy starting when you are 65 and enrolled in Part B. After this time, you may have to pay higher premiums or could be denied coverage. See more on the Medicare Website
- Age 66 or 67 – Full Social Security Retirement Age: Age 66 is the starting age for retirees born between 1943 and 1954 to collect their full Social Security retirement benefit. For those born between 1955 to 1959, the retirement age increases by 2 months per year. For those born in 1960 and after, it’s age 67. Your full retirement age marks the point at which your benefit will no longer be reduced for early collection. In addition, if you are still working, your Social Security benefits are no longer affected by that income. If you are married or divorced, your spousal benefits will no longer increase so it may make sense to collect those benefits now.
- Age 70 – Delayed Social Security Retirement: If you were able to wait until age 70 to collect your Social Security benefits, your patience will be rewarded. Your benefit will be 32% more than if you took it at your full retirement age. This is your maximum Social Security benefit, so there’s no need to wait any longer to file.
- Age 70 ½ – Required Minimum Distribution (RMD): When you saved pre-tax dollars into a tax-deferred account like a 401k or IRA, Uncle Sam eventually wants to collect those deferred taxes. Starting in the year you turn 70 ½, the IRS requires that you take a Required Minimum Distribution (RMD) – the minimum amount that you need to withdraw from your retirement account each year. Keep in mind that you will have to pay income taxes on these withdrawals. RMD Guide
The penalty is pretty stiff if you forget to take your RMD. The IRS imposes a 50% penalty for the amount of the RMD that was not taken. There are specific deadlines for taking your RMD in the first year. Every year after, the deadline is December 31.