After the half-century mark, some birthdays take on added significance. Because of the potential impact on one's retirement income, it is crucial to have a firm grasp of these anniversaries.
Here are the important birthdays to be aware of:
At age 50, workers in certain qualified retirement plans are allowed to start making annual catch-up contributions in addition to their normal contributions. Those who participate in 401(k), 403(b), and 457 plans can contribute an additional $6,500 per year in 2022. Those who participate in Simple Individual Retirement Account (IRA) or Simple 401(k) plans can make a catch-up contribution of up to $3,000 in 2022. And those who participate in traditional or Roth IRAs can set aside an additional $1,000 a year.1,2
At age 591⁄2, individuals are able to begin withdrawing from qualified retirement plans without incurring a 10% federal income-tax penalty. This applies to people who have contributed to IRAs and employer-sponsored plans, such as 401(k) and 403(b) plans (457 plans are never subject to the 10% penalty). However, it’s important to remember that distributions from traditional IRAs, 401(k) plans, and other employer-sponsored retirement plans are taxed as ordinary income.
At age 62 workers become eligible to start drawing Social Security retirement benefits. However, if a person continues to work, those benefits will be reduced. The Social Security Administration will deduct $1 in benefits for each $2 an individual earns above an annual limit. In 2022, the income limit is $19,560.3
At age 65, individuals become eligible to apply for Medicare. The Social Security Administration recommends applying three months before reaching age 65. It’s important to note that if you are already receiving Social Security benefits, you will automatically be enrolled in Medicare Part A (hospitalization) and Part B (medical insurance) without an additional application.
Age 65 to 67
Between ages 65 and 67, individuals become eligible to receive 100% of their Social Security benefit. The age varies, depending on birth year. Individuals born in 1955, for example, become eligible to receive 100% of their benefits when they reach age 66 years and 2 months. Those born in 1960 or later need to reach age 67 before they’ll become eligible to receive full benefits.
In most cases, once you reach age 73, you must start taking required minimum distributions from a traditional Individual Retirement Account and other defined contribution plans. You may continue to contribute to a traditional IRA past age 701⁄2 as long as you meet the earned-income requirement.
Learning about these milestones might help you plan for retirement income and perks. However, being aware of significant birthdays will help you avoid any fines that might be imposed for forgetting them. It's safe to say that this is the single most important advantage of memorizing important anniversaries.