Planning early for retirement is clearly beneficial because it allows time for investments to grow and accumulate over the years. To help with financial planning, read the below tips that will help guide your decision making process and maximize your investment:
• This is typically the earliest age in which employees can join a 401(k) plan offered for their employer. Not every company offers a 401(k) plan, so explore other investment options if this is the case.
• You can begin adding $1,000 more in a traditional Roth IRA and start deferring paying income tax on more of your retirement savings in a 401(k) or IRA.
• If you leave your job at age 55 or older, you can start withdrawing from your 401(k) in lump sums, but not IRA, without paying the 10% penalty for early withdrawals.
Age 59 ½:
• The 10% penalty withdrawal on IRA ends. However, you don’t have to take withdrawals until you reach age 70 ½.
• You become eligible to sign up for social security benefits, however if you do decide to receive payments starting at age 62, then your payout may be reduced. For example, someone who is eligible for $1,000 monthly benefits at age 66 would only get $750 monthly at age 62.
• Medicare eligibility begins and the initial enrollment period begins three months before the month you reach age 65 and ends three months after your 65th birthday. It is beneficial to sign up early because premiums increase by 10% for each year you are eligible, but did not sign up.
• For individuals born between 1943 -1954 (baby boomers), you can receive the full amount of social security benefits. The retirement age has increased gradually for those born between 1955-1959 from 66 and two months to 66 and 10 months. Once the age requirement is met, you can work and claim social security benefits without having any payments withheld.
• Full retirement age for workers born in 1960 or later begins at age 67.
• Your social security payments grow by 8% each year you delay claiming up until age 70. However, after age 70 there are no additional benefits for delaying.
Age 70 ½:
• You are required to make withdrawals from your 401(k) and IRA at this point, and if you don’t withdrawal the correct amount you will be required to pay 50% tax on the amount that should have been taken out.