As you prepare for retirement, recognizing and understanding the following key age milestones is important. In addition, diversifying your investments and having an appropriate asset allocation plan is also critical, if you wish to maximize your retirement benefits and avoid potential penalties, as you approach these milestones.
Age 50: Maximize Employee Contributions to Qualified Plans and Defer Taxes.
If you're currently working, you may be eligible to make higher contributions to qualified plans, such as 401(k) plans, 403(b) plans and a Thrift Savings Plan, of up to $24,500 in 2018. For traditional IRAs, you may contribute up to $6,500 in 2018.
Age 55: Potentially Take Early Withdrawals Without Penalty.
You may be able to make early withdrawals from your company-sponsored retirement plan without having to pay the 10-percent early withdrawal penalty.
Age 59 1/2: No Early Withdrawal Penalty
Distributions from a qualified employer plan 401(k), 403(b), traditional or rollover IRA, and annuities will no longer be subject to an early withdrawal penalty.
Age 62: Eligibility for Social Security Begins
Payments can begin but may be permanently reduced by as much as 30 percent if you sign up at this age. If you continue to work, part or all of your payments could be temporarily withheld.
Age 65: Medicare Eligibility
You can sign up beginning three months before your 65th birthday and coverage can start as early as the month you turn 65. If you don't sign up on time (or within eight months of leaving a job with group health coverage), you could affect premium payments and supplemental coverage.
Age 67: Social Security Full Retirement Age (if born 1960 or later)
Eligible to collect unreduced Social Security payments and avoid the earnings limit if you want to work and collect social security benefits at the same time.
Age 70: Social Security Must Begin
Payments must start no later than age 70. If you delay it until this age, benefits will have increased by about 8 percent per year, but there is no additional benefit to waiting longer to claim Social Security.
Age 70 1/2: Required Minimum Distributions Begin
Distributions from traditional IRAs and 401(k)s are required after age 70. Employed individuals can delay distributions from their current 401(k) until April 1 of the year after they retire (unless they own 5 percent or more of the company sponsoring the plan).
Bank of Hawaii can help you incorporate these key retirement milestones and translate them into an overall retirement plan and distribution timeline. Contact us to learn more about how to best prepare for your future.