Is it time to retire? Are you thinking about retirement? You've worked hard and built up a nest egg. You're considering retiring but when is the optimal time to improve the financial outcome? What else is there to consider?
Here is a guide to age milestones that may impact taxes and retirement benefits depending on when you decide to retire.
Qualified public safety employees such as police officers, firefighters, and EMS workers, who separate from service “after” the age of 50 may take distributions from their government-sponsored retirement plans without the 10% early withdrawal penalty.
The Rule of 55 allows employees to take a distribution from an employer-sponsored retirement plan without the 10% early distribution penalty tax when they separate from service “after” the age of 55. A caveat - The exception only applies to withdrawals from the plan that you were contributing to at the time you separated from service. Previous employer plans and personal IRAs are not exempt from the 10% early distribution penalty tax.
Age 59 ½
At this age, there is no 10% penalty for withdrawals from qualified retirement assets.
The earliest age a widow or widower can receive social security survivor benefits. Social security will still look at the full retirement age of the applicant and the benefits are reduced based on the birth year.
This is the earliest age to apply for social security benefits. However, the benefits are reduced permanently, and there are earned income restrictions that will reduce the benefits if you plan on continuing to work perhaps on a part-time basis. Don’t worry, though. If you do work, the money is not taken away from you. A credit will be added back to your social security benefits for future years.
The age at which you are eligible to enroll in Medicare.
Age 66 – 67
Depending on the year of birth, this is the age range at which you can claim full social security benefits.
After reaching the age of 70, there will be no additional benefit to delay receiving social security benefits. Social security benefits will be maxed out at the age of 70 regardless of when the full retirement age is.
The SECURED Act changed the rules pertaining to the required minimum distribution. In the year you attain the age of age 72, there will be a required minimum distribution that needs to distribute from employer-sponsored retirement plans and traditional IRAs.
Keep in mind that these are just guidelines and not the recommended ages.
There are many moving pieces from taxes, social security benefits, life expectancy, and income needs, to name a few, that you have to juggle in retirement.
If you need any help, please do not hesitate to seek professional assistance as this is a very important stage in your life, and taking the right steps can make your retirement years more successful.