Remember turning 16 and getting your driver's license? What about being able to vote at 18? As you become older, you might find that there are fewer milestone birthdays in life to circle on the calendar.
But did you know that there are certain birthdays as you approach retirement age that can have an effect on your taxable income, healthcare eligibility, and retirement benefits? While they might not be as exciting or have the same wow factor as birthdays when you were a kid, there are certain birthdays as you become older that you should begin to take note of during your retirement planning.
Withdrawals taken from your individual retirement accounts (IRAs) prior to age 59½ are typically subject to a 10% federal income tax penalty. And while they may not be baking you a cake, the IRS is giving you reason to celebrate turning age 59 ½ by allowing you to begin taking penalty-free withdrawals from your IRAs and other qualified retirement plans.
When you turn age 62, you are eligible to receive your Social Security benefits. However, if you take them at age 62 (considered early), your benefits will be reduced by up to 30%. To receive your full benefits you must wait until you reach your full retirement age - which can be anywhere from 65 to 67 depending on the year you were born.
Turning age 65 qualifies you to enroll in Medicare. When you begin to receive your Social Security benefits, you are automatically eligible for Medicare Part A hospital insurance benefits. However, Medicare Part B benefits are strictly voluntary and require a monthly premium. In order to obtain coverage at the earliest possible date, you should try to enroll about two or three months before you turn age 65.1
When you turn age 72, you must begin taking minimum distributions from most of your tax-deferred retirement plans. These distributions are mandatory! If you don't take them, you could be facing a 50 percent penalty on the amount that should have been withdrawn. Annual required minimum distributions are calculated according to life expectancies determined by the federal government.