Birthday Milestones to and Through Retirement
Reaching a certain age means being able to save even more and new financial opportunities to get ready for your retirement years.
The year you turn 50, it is time to “catch up!” Catch up on those contributions you wish you would have made when you were 21!
||2023 Contribution Limit
||2023 Catch-Up Contributions
||Total Allowable Contribution
|Traditional or Roth IRA
|401(k) and 403(b)
"Aging is an extraordinary process where you become the person you always should have been."
– David Bowie
If you participate in a health savings account (HSA) at work, you’re allowed a “catch-up” contribution to your HSA starting in the year in which you turn 55. The catch-up amount is an additional $1,000 (annual contribution limits for 2023 for single individuals is $4,850; $8,750 for families).
There is a special exception for penalty-free distributions from qualified plans at age 55. If you separate from service in the year in which you turn 55 or any year thereafter, you can withdraw funds from that plan without a 10% additional tax penalty. IRAs do not have a pre-59 ½ exception for separation from service. Keep this in mind when considering an IRA rollover.
Age 59 ½:
Age 59 ½ is the milestone at which you can access most retirement accounts for any reason without incurring a 10% additional tax penalty. These accounts include IRAs, 401(k)s, 403(b)s, profit sharing plans, other qualified plans, and non-qualified annuities.
Most qualified plans, such as 401(k)s, 403(b)s, and profit sharing plans, allow for in-service non-hardship withdrawals at age 59 ½.
If you are still working and looking to diversify by rolling funds from your qualified plan to an IRA, you may now be able to do so. Be sure to ask your plan advisor or recordkeeper to make sure the plan allows for in-service distributions.
"As soon as you feel too old to do a thing, do it."
– Margaret Deland
If you have lost a spouse, age 60 is when you may become eligible to collect a Social Security survivor’s benefit (assuming your spouse was eligible and based on your current marital status).
The month following your 62nd birthday is the month in which you first become eligible to collect Social Security retirement (individual and/or spousal) benefits. Unless disabled, your benefit at age 62 will be about 75% of your full retirement benefit. If eligible, a reduced spousal benefit may also be available. The Social Security Administration generally recommends applying for benefits three months prior to the month in which you intend to start receiving benefits.
The month in which you turn 65 is the month you become eligible for Medicare. If you are not collecting Social Security, you can enroll in Medicare Part A three months prior to your 65th birthday to avoid a gap in health insurance coverage. Most people will be eligible for premium-free Part A coverage.
Unless covered by an employer-sponsored health plan, you may want to consider enrolling in Medicare Part B to avoid future higher premiums.
If you plan to continue to work, check your employer’s plan to see how it integrates with Medicare and if it is more beneficial for you to opt out of Part B.
"Never leave till tomorrow which you can do today."
– Benjamin Franklin
If you turn 66 before January 1, 2021, you will reach full retirement age for Social Security on your 66th birthday. Assuming you have not received retirement or disability benefits yet, in the month following your 66th birthday, you will be eligible to collect your full retirement benefit. If eligible, a full spousal benefit may be available in place of your benefit if it is a greater amount.
The year in which you turn 72 is referred to as the “first distribution year,” and you must begin taking required minimum distributions (RMDs) from qualified accounts.* The IRS allows the first RMD to be postponed until April 1 of the year following the “first distribution year.” Subsequent RMDs are due by the end of each year.
Postponing the first RMD results in the need to take both the first and second RMDs in the same tax year.
Time Is of the Essence
If you are approaching or already in retirement and need help planning, now is the time to reach out to your Stifel Financial Advisor to review your options and discuss the benefits of aging!
Please Note: If you reached age 70 ½ in 2019 or prior, your RMDs will begin at 70 ½; however, if you reach age 70 ½ in 2020 or after, you may delay your first RMD until age 72. This is due to the recent enactment of the SECURE Act.
* For 401(k)/403(b) plans, RMDs can be delayed if you are still working after the age of 72, assuming the plan allows it. This does not apply to owners of 5% or more of the company sponsoring the plan..