Planning for retirement will help ensure that you're able to enjoy your senior years to the fullest without worrying about paying the bills. And in the course of your planning, there are a few key ages to keep in mind.
Once you turn 50, you'll be eligible to make catch-up contributions in your 401(k) or IRA. For the current year, as well as 2021, that means getting an extra $6,500 in your 401(k) and an additional $1,000 in your IRA.
If you're eligible to participate in a health savings account, or HSA, age 55 is when catch-up contributions start. You're entitled to a $1,000 catch-up this year, as well as in 2021.
Age 59 1/2
Because you get a tax break for funding a traditional 401(k) or IRA, you're required to leave that money in your retirement plan for a certain period of time. Taking an early withdrawal will result in a 10% penalty. Once you turn 59 1/2, you're entitled to your money without having to worry about being penalized. However, if you're not actually retiring at 59 1/2, it pays to leave your savings alone.
This is the earliest age you can sign up for Social Security -- though it's not necessarily the best age. Filing for benefits at 62 will result in an automatic lifelong reduction in your monthly payments. That could prove problematic if you enter retirement without a lot of savings.
You're eligible for Medicare beginning at age 65, and you're allowed to sign up three months before the month of your 65th birthday. However, you don't have to enroll in Medicare at 65 on the nose. If you're still covered by a group health plan through a job (either yours or a spouse's), you can delay your Medicare enrollment without penalty.
You're entitled to your full monthly Social Security benefit based on your earnings history at full retirement age, which is either 66, 67, or somewhere in between, depending on your year of birth. However, you're allowed to delay your filing beyond full retirement age, and for each year you do, your benefits will increase 8% on a permanent basis. Delaying benefits is a good solution when you're short on retirement savings or simply want more income to enjoy.
Though you don't have to sign up for Social Security at age 70 if you haven't done so prior, that's the age at which delayed retirement credits for holding off on benefits stop accruing. Or to put it another way, there's nothing to be gained financially by waiting past the age of 70 to claim Social Security, so you might as well sign up then and start collecting your money.
Unless you've saved in a Roth IRA, the money in your retirement account can't just sit there indefinitely. You're compelled to take withdrawals known as required minimum distributions, or RMDs, beginning at age 72. Failing to take those RMDs will result in a 50% penalty on the amount you leave in your account, so that's a consequence best avoided. One thing you should note is that the age to start taking RMDs was formerly 70 1/2, but it's now increased, buying you a little more time to let your savings enjoy tax-advantaged growth.
Retirement planning is a years-long, complex process, but one worth putting time into. Be sure to note these key ages in the course of your decisions. Doing so could help you make the most of your savings efforts and enjoy your senior years to the fullest.