Have you heard that 50 is the new 40! Not only do you get to turn the clock back when you turn 50, you now qualify to contribute more money to your 401k and other qualified accounts. Qualified accounts are simply any retirement account that is tax-deferred. Each type of qualified account has a new different amount allowed to be added, so see the links below to learn more.
Age 59 1/2
Often, I find myself scratching my head in wonder of where the US government comes up with our governing tax laws and this rule is no exception. If you want to take money out of a qualified account (IRA, 401k, etc.) before you turn 59 1/2, you will find that the government will penalize you an extra 10% tax. Once you turn 59 1/2, the governmental penalty is now waved. Like most governmental laws, there are always exceptions. I’m just not so sure why our US government had to make this age a half birthday. Nevertheless, I continue to scratch my head in wonder of where these tax laws come from!
If you happen to be 60, your favorite classic rock song is now probably elevator music! If that doesn’t scare you, then you are prepared to take your golden years by storm! On a heavier note, age 60 is when Widows and Widowers are eligible to receive a survivors benefit from the Social Security department. Now, we are dealing with the US government so you better understand other rules apply. See link below for more details. The last bit of good news is now you get to enjoy elevator rides with great music!
By age 62 most people are ready to retire, but most are concerned they do not have enough income to retire on. The good news is that when you turn 62 you are now eligible to take your Social Security benefit early. That means you can start your Social Security income before you reach full retirement! The big question is, should you take it early?
Just when you are starting to get comfortable with your sixties, now you have to get a grip on the fact that you are eligible for Medicare! At age 65 you now qualify to apply for Medicare. There is a seven-month initial enrollment period where you can apply for either, Part A or Part B or both. The question then becomes, which should you apply for? See link below for more details.
We have listened in this article that age 66 is when you can take full Social Security, but in reality, 66 may not be your actual age you can take Social Security. Yet another US governmental rule that has me scratching my head. Your full Social Security age depends on the year you were born. The earlier you were born the sooner you will be able to take your full Social Security. And who says that growing old doesn’t come with perks!
Many call the year you turn 70 as the new retirement age! Where or not you want that to be true, 70 represents the age as when your Social Security benefit maxes out. If you delay taking Social Security past this age, then you are just wasting time and money as the benefit will not get any larger by delaying any longer. Keep in mind that your benefit will continue to increase with a cost of living adjustment past your age 70.
Age 70 1/2
I have stated many times that the IRS has made plenty of rules that make me scratch my head, but this one takes the cake. When you reach your 70 1/2 birthday, you are required to take required minimum distributions. Of all the complications that surround this rule, the most confusing are when you actually need to take your distribution. The actual rule states you are required to take your first distribution the year following your 70 1/2 birthday, but if you do, then you will be required to take TWO distributions that year. Even though the rule allows you to delay the first year, don’t wait as it will cost you more tax as you will have to take multiple distributions when you turn 71!
This material was prepared for informational and/or educational purposes only. Neither Insight Folios Inc nor its affiliates offer tax or legal advice. It is always best to consult with a qualified tax or legal professional regarding the best options for your particular circumstances.