When it comes to retiring, experts are pretty unanimous, Americans are not as prepared as they should be. There are many smalls steps that people should take to have the lives that they want in their golden years. These steps also tend to coincide with certain milestones that you should mark on your calendar.
This date marks the end of the year each and every year. It’s also the date that allows you to maximize the tax benefit of any tax-deferred savings that you might make during the year. Many people will make big donations or contributions on this date to cut the amount of taxes that they have to pay each year.
This is the date that the tax man expects his money. It’s also the last day that you can make contributions in your retirement accounts for the previous year. There are limits to how much you can put into an IRA in any given tax year. The limit for individuals below 50 years of age is $5,500 per year. You can add in an extra $1,000 if you’re over 50. Should you be a bit short of this limit come December 31, you can designate any contributions until April 15 for the previous year, at least until you hit the annual contribution limit. This can help you when it comes to your tax bill.
Your 59th Birthday
This is the date that you can start withdrawing from an IRA or 401k without having to pay a penalty for early withdrawals. Once you hit this age, you can start to access some of the money that you’ve saved over the years.
Your 62nd Birthday
Once you hit 62, you can start drawing Social Security benefits. Whether you want to start taking your benefits at this age might be related to your health and your job situation. If you’re looking to continue working, it might be best to wait a while before starting to draw your benefits. On the other hand, if you have bad health or a family history that has a lower life expectancy, you might want to draw as early as possible.
Your 65th Birthday
This is the date that you become eligible for Medicare. There’s no reason not to sign up immediately, and you can actually start the process of signing up three months before you turn 65. If you decline to sign up at age 65, you might wind up paying more for the rest of your life.
October 15 to December 7
This is the open enrollment period for Medicare each year. You might want to make some changes to your coverage or sign up for a Medicare supplement during this period. Once the window is closed, your options also close until the next open enrollment period.
Your 70th Birthday
If you’ve not already signed up for Social Security, this is the point at which it no longer makes any sense to wait. Your payment will not go up after you turn 70, so you might as well make it a part of your planning process to sign up.
Age 70 1/2
This is the age at which you need to start making the minimum required distributions from any traditional IRA or 401k plans. If you fail to start taking the RMDs, you’ll actually wind up with a pretty hefty tax penalty. Your distributions need to start by April 1 of the year that you hit 70.5 years of age.
By keeping these ages in mind, you’ll be able to maximize your retirement planning. Consult a financial professional if you have any questions as you approach these milestones, there are many ways to increase your retirement income and protect your nest egg. We are here to help.