Here are 7 milestone dates to note. Cake is optional.
1. Age 59½: You’re exempt from the 10% federal penalty tax for IRA and 401(k) withdrawals.
This may be the first time you’ve celebrated a half-birthday. But 59½ may be worth a small party. After you reach 59½, you can take withdrawals from your retirement accounts without owing an early withdrawal penalty. Keep in mind that you’ll still owe federal income taxes on withdrawals from tax-deferred accounts.
2. Age 62: You’re eligible for Social Security—at reduced benefits.
This is the earliest age you can claim regular Social Security retirement benefits. However, you’ll take a hit for claiming early. How big of a hit? Someone with a full retirement age of 66 would receive 25% less each month—for life—by starting benefits at 62.
3. Age 64¾: Consider enrolling in Medicare.
The 7-month initial sign-up window to enroll in Medicare starts 3 months before you turn 65. If you don’t enroll within 3 months of your birthday month, you may have to pay higher premiums for life. There’s an exception though: If you still have employer-sponsored insurance, you can wait until that coverage ends. Check out your options earlier, so you can figure out what will work best for you.
4. Age 65: Consider signing up for Medigap.
If you decide to purchase Medicare supplemental insurance (Medigap), there’s a separate sign-up window. And you won’t want to miss it. The enrollment period begins the first day of the month you turn 65. Medigap is private insurance that covers some of the costs not covered by traditional Medicare. During the enrollment window, you can’t be denied Medigap coverage or charged extra because of poor health. Miss this window and you could be denied coverage or charged higher premiums for life. Like Medicare, you can wait to sign up for Medigap if you have insurance through an employer.
5. Age 66–67: You’re eligible for full Social Security.
Based on your birth year, this is the age you qualify for your full Social Security retirement benefit. However, it may pay to wait a little longer to collect. The value of your benefit will increase each month you wait until you reach age 70. The best time to collect depends on personal circumstances, such as how long you think you’ll live, how many assets you have, and whether or not you want to leave an inheritance.
6. Age 70: File for Social Security if you haven’t already.
Don’t put off filing for Social Security retirement benefits past age 70. At this age, your benefits won’t increase by postponing them. If you waited this long, your benefits could be nearly one-third higher than if you had claimed them at your full retirement age.
7. Age 70½: Begin taking required minimum distributions (RMDs).
Tax deferrals on traditional IRAs and 401(k)s don’t last forever. And this is the age when they run out. Generally, your RMD for a given year must be withdrawn by December 31 of that year. However, if you’re taking an RMD for the first time, you may delay withdrawing the RMD until April 1 of the year after the year you turn age 70½. If you decide to delay taking your first RMD until the next year, you’ll have to take two minimum distributions during that calendar year. This could put you in a higher tax bracket for that year, significantly increasing the tax you owe. If you don’t take an RMD, you could owe a penalty of up to 50% of the amount you should have withdrawn.