Once you turn 50, your birthdays might have greater implications for your retirement. Here are some that you should mark on your calendar.
Most children stop being “and-a-half” somewhere around age 12. Kids add “and-a-half” to make sure everyone knows they’re closer to the next age than the last. When you are older, “and-a-half” birthdays start making a comeback. In fact, starting at age 50, several birthdays and “half-birthdays” are critical to understand because they have implications regarding your retirement income. Here are a few you should be on the lookout for once you reach 50.
Age 50
At age 50, workers in certain qualified retirement plans are able to begin making annual catch-up contributions in addition to their normal contributions. Those who participate in 401(k), 403(b), and 457 plans can contribute an additional $7,500 per year in 2024. Employees and employers who participate in SIMPLE (Savings Incentive Match Plan for Employees) plans—either SIMPLE IRAs or SIMPLE 401(k) plans—can make a catch-up contribution of up to $3,500 in 2024. And those who participate in traditional or Roth IRAs can set aside an additional $1,000 a year [1].
Age 59½
At age 59½, workers are able to start making withdrawals from qualified retirement plans without incurring a 10% federal income tax penalty, although they probably shouldn’t. This applies to workers who have contributed to IRAs and employer-sponsored plans, such as 401(k) and 403(b) plans (NOTE: 457 plans are never subject to the 10% penalty). Keep in mind that distributions from traditional IRAs, 401(k) plans, and other employer-sponsored pre-tax retirement plans are taxed as ordinary income.
Age 62
At age 62 workers are first able to draw Social Security retirement benefits. However, if a person continues to work, those benefits will be reduced. The Social Security Administration will deduct $1 in benefits for each $2 an individual earns above an annual limit. In 2024, the income limit is $22,320[2].
Age 65
At age 65, individuals can qualify for Medicare. The Social Security Administration recommends applying three months before reaching age 65 (You can enroll three months prior, the month of your birthday and three months after turning 65 to avoid penalty). It’s important to note that if you are already receiving Social Security benefits, you will automatically be enrolled in Medicare Part A (hospitalization) and Part B (medical insurance) without an additional application [3].
Age 65 to 67
Between ages 66 and 67, individuals become eligible to receive 100% of their earned Social Security benefit. The age varies depending on birth year and month. Individuals born in 1955, for example, become eligible to receive 100% of their benefits when they reach age 66 years and 2 months. Those born in 1960 or later need to reach age 67 before they’ll become eligible to receive full benefits [4].
Age 70
For those who haven’t filed, from full retirement age to age 70, your Social Security benefit grows by 8% per year. Once you reach age 70, you should go ahead and file for Social Security because your benefit no longer grows and there is no penalty for continuing to work, other than your combined income calculation used by Social Security when calculating income taxes.
Age 73
In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a traditional Individual Retirement Account and other defined contribution plans like 401(k)s. You may continue to contribute to a traditional IRA past age 70½ as long as you meet the earned-income requirement.
Understanding key birthdays may help you better prepare for certain retirement income and benefits. But perhaps more importantly, knowing key birthdays can help you avoid penalties that may be imposed if you miss the date.
If you have any questions about upcoming birthdays and how you can prepare for the future, please give us a call today! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.
Sources:
- https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000
- https://www.ssa.gov/cola/
- https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare
- https://www.ssa.gov/benefits/retirement/planner/agereduction.html
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