Attorney Carrie Russom Quraishi tells clients to consider some of the most important age-related milestones that can affect a retirement plan.
Age 55. Even after having a successful career, going into an early retirement could create a money crunch. In most cases, money can’t be taken out of a 401(k) until reaching age 59½. However, withdrawing funds from an employer-based 401(k) on or after your 55th birthday can begin after resigning or being dismissed from work. To retire early, it’s important to review the Internal Revenue Service’s guidelines for early distributions.
Age 59½. Once hitting 59½, money can begin being withdrawn from a pre-tax retirement account without penalty. Keep in mind: disbursals could be considered taxable income whether taking funds from a traditional IRA or 401(k).
Ages 62-64. Social Security can be received at age 62. However, turning to Social Security early can lead to a reduced benefit—most people who retire between 62 and 64 will only be able to receive about 75% of their full retirement benefit. That’s a locked-in rate meaning you won’t be eligible for more money later.
Age 65. Prospective retirees are eligible for Medicare once they turn 65. One will likely want to enroll in Medicare—failure to do so can lead to penalties. If the individual has the money, it may make sense to purchase a Medicare supplemental plan since standard Medicare doesn’t fully cover the cost of some procedures.
Ages 66-67. The “Full Retirement Age” for most Americans currently falls between 66 and 67; the Full Retirement Age, or FRA, is dependent upon one’s year of birth. Americans born between 1955 and 1959 attain their FRA when they’re 66. Anyone who was born after 1960 reaches FRA on their 67th birthday.
Ages 67-70. A late retirement can pay significant dividends, especially for Americans who expect to be more reliant on Social Security. Waiting until 70 can be a smart move for Americans who don’t need Social Security in their late 60s and expect to be in reasonably good health.
Ages 70-72. If an individual wants to keep working, or to wait longer before retiring, there’s some good news: annuities and reverse mortgages will continue accruing value. There’s the chance to maximize social security benefits. However, anyone who turns 70½ after December 31st, 2019 is required by law to begin making IRA withdrawals by age 72.
Choosing to retire is no small decision. While going into retirement early is a great opportunity, it can see an individual’s Social Security benefits slashed. Waiting too long to retire may deprive a person of the time needed to enjoy their hard-won reward.
One way or another, retirement is a personal choice based on an individual’s unique financial needs, dreams, and aspirations. A wealth management attorney can help assess a person’s circumstances to create a customized retirement plan.
Quraishi Law and Wealth strives to ensure that clients are ready to retire and have a customized plan to suit them. To learn more about the firm and how they help their clients, visit www.quraishilaw.com.