Following years of saving as well as paying taxes, in retirement comes the time when you can collect Medicare and Social Security, along with qualifying for certain extra tax perks. However, in order to maximize the returns from these benefits, meeting deadlines is a must, otherwise you would have to deal with higher taxes, fees and penalties. So, ensure that you consider the following dates as you plan for your retirement.
As you grow older you are able to save extra money in IRAs and 401(k)s. Workers aged 50 and above are capable of deferring taxes on so much as $23,000 in 403(b) plans, 401(k) plans, as well as the Thrift Savings Plan of the federal government along with $6,500 with respect to IRAs.
As you turn 55 or even later, and quit, retire or are laid off, you are entitled to 401(k), but not IRA, withdrawal with regards to the retirement account linked with the recent job you left without paying the 10% penalty for early withdrawal. For public-safety retirees the age for this category of withdrawal is 50 years or above.
As you turn 59.5 years, you are no longer required to pay the 10% penalty applicable to retirement account distributions for early withdrawals. However, you are still required to pay income tax on conventional IRA and 401(k) withdrawals.
At the age of 62 years, workers first attain eligibility for Social Security payments. But your payments would be permanently trimmed down by around 30 percent once you sign up at 62 years. Moreover, if you are working and simultaneously collecting Social Security benefits at this age, a portion or your complete payment can be provisionally withheld.
The age of 65 years marks the beginning for the eligibility for Medicare. If you wish the coverage to start as soon as you turn 65, you may opt for signing up as early as three months prior to your 65th birthday. If you delay in signing up, your premiums for Medicare Part B and D could increase permanently, and you may even fail to obtain supplemental coverage.
It is the age when majority of baby boomers (those whose birth dates lie between 1943 and 1954) attain eligibility for the collection of complete Social Security payments that they have earned.
For obtaining Social Security, the full retirement age is 67 years for any person who is born in the year 1960 or after. Workers who are presently aged 53 years or less need to wait till the age of 67 years for collecting the full payments they are eligible for and evade the limit on earnings.
If you delay further in signing up to obtain Social Security benefits, your payments would rise by 8% per annum until you attain the age of 70 years. After this age, you would not be getting any additional benefit for postponing Social Security payments.