Retirement Milestones-Print

RETIREMENT PLANNING

PLANNING FOR RETIREMENT

Mark Your Calendar for These Milestones

AGE 50: CHECK ON CATCH-UP CONTRIBUTIONS ■ Catch-up contributions, available to those age 50 and older, are additional contributions above the normal contribution limit to your IRA or employer-sponsored retirement plan. * ■ They are designed to help you decrease any retirement savings shortfall by increasing the amount you’re saving in the years leading up to retirement. ■ Contributions can be made to traditional and Roth IRAs as well as to certain employer- sponsored retirement plans — if you have sufficient earned income. AGE 59 1/2–62: DETERMINE THE BEST TIME TO BEGIN TAKING WITHDRAWALS ■ Regardless of what type of retirement account you have, you can begin taking withdrawals penalty free at 59½. ■ Working after 59½? You will have to follow your employer-sponsored plan’s rules for withdrawal. Your “in-service” payouts might be limited while you are still working. ■ Age 62, according to the IRS website, is the earliest you can begin collecting Social Security benefits unless you are disabled. However, taking benefits at this age triggers a roughly 25%–30% permanent reduction in your benefit and can reduce your spouse’s benefit by approximately 30%–35%. AGE 65: APPLY FOR MEDICARE ■ If you already receive Social Security, you’ll be automatically enrolled in Medicare Parts A and B at age 65. ■ If you are not collecting Social Security benefits yet, you may apply for Medicare. Ideally, you should apply for Medicare three months before the month you turn 65 even if you plan to delay receiving retirement benefits because you are working. Apply online at www.ssa.gov, at your local Social Security office or by calling 800-772-1213. ■ Before age 66 OR 67: You can receive Social Security retirement or survivors’ benefits and work at the same time; however, if you are younger than full retirement age and earn more than certain amounts, your benefits will be reduced. Your benefit reductions are not lost, as your benefit will be increased at your full retirement age to account for benefits withheld due to earlier earnings. Contact the Social Security Administration for additional stipulations.

50

59 1/2 to 60

65

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AGE 66–67: BEGIN COLLECTING FULL RETIREMENT BENEFITS ■ At age 66 or 67, depending on the year you were born after 1938, the Social Security Administration acknowledges that you’ve reached the full retirement age (FRA). ■ After you have reach FRA, you can get full benefits even if you continue to work. If you delay filing benefits after FRA until age 70, however, your benefits will increase by 8% each year until age 70. AGE 70: DON’T PUT OFF RECEIVING BENEFITS ■ At age 70, there are no further increases in Social Security benefits. If you delayed collecting Social Security, the 8% annual increase stops when you reach age 70, so there’s no reason to further delay taking benefits. AGE 70 1/2: MAKE SURE TO TAKE YOUR RMDS ■ The IRS requires you take Required Minimum Distributions (RMDs) from your traditional IRAs no later than April 1 of the year following the year you reach age 70½. If you do not take RMDs by the prescribed deadline, the IRS may assess a tax penalty of 50% on the distribution you should have taken. Money in Roth IRAs can continue to grow without taxation or penalties because Roth IRAs do not require minimum distributions. ■ If you are still working, assets in your employer-sponsored retirement plan at that job can stay there until you retire. But if you are retired, you are required to take RMDs no later than April 1 of the year following the year you reach age 70½.

66 to 67

70

70 1/2

* For employer-sponsored retirement plans, check plan rules; not all plans allow catch-up contributions.

Managing these milestones on the path to retirement can be complex. Work with a Commerce Trust advisor who can help you navigate your situation and minimize taxes while helping to achieve your retirement goals.

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