Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Key Dates & Milestones: Social Security, Pensions, IRAs, Medicare

There are many age-related financial and planning milestones that you need to be aware of in your sixties. Keep this list in mind.

59 ½ – Penalty Goes Away
This is the age at which one can withdraw money from traditional IRAs, 401(k)s or similar retirement plans without restrictions and without an added 10% tax penalty. Withdrawals will still be taxed at normal tax rates.

60 – Survivors
Sixty is the age you can begin to collect a Social Security survivor benefit if your spouse or ex-spouse (if you were married for at least 10 years and never remarried) has died.

62 – Social Security – First Call
The earliest age that someone could collect Social Security retirement benefit. In general, most people would not want to file for benefits at this early age although certain spousal strategies may be an exception. Take time to plan just don’t take it because you can. You could be leaving money on the table. Your health is a major consideration at this point.

62 – Pension Alert
Sixty-two is a common age that pension benefits kick in from other sources. Pension features can vary significantly depending upon which companies and industries you have worked for, or if you have been a government employee. Be sure to carefully evaluate your pension plan features well before this date so you can properly plan for the benefit that these provide.

65 – Medicare
Sixty-five is the Medicare eligibility age. Plan to sign up for Medicare benefits within a seven month window around this birthday.

66 – Social Security “Magic Age”
Sixty-six is the ‘magic age’ for Social Security when many options become available. For a lot of boomers, 66 is the official full retirement age. There are a number of creative Social Security strategies for couples that become available at this point, such as File and Suspend and Restricted Filing.

70 – Social Security – Last Call
Don’t delay any longer. Take your social security at this point, there are no additional benefits to delay filing for Social Security benefits. If you have not filed for benefits by now, you have likely maximized your lifetime monthly Social Security benefit. Be sure that you now file immediately.

70½ – Required Distributions Ahead
Seventy and a half is the age at which owners of retirement accounts such as IRAs, 401(k)s or other similar retirement plans are required to start taking specified required minimal distributions (RMDs). They actually have until the following April to make take the first year distribution. After that, each year’s distribution must be taken by December 31 of that year. The total required distribution is based on the total values of all your IRAs and retirement plans as of December 31 of the earlier year.

When to take social security and distributions from other retirement funds is a major financial decision that could impact the amount you could ultimately receive from this program. Plan well so that this revenue stream will become a valuable piece of your retirement planning. Call us if you have questions.

By Gary W. Fleming