As you enter your 50s, it’s not unusual to start thinking more seriously about your personal finances, even if you haven’t already. You may know that certain ages play an important role in financial planning opportunities, but staying on top of these important milestones can be a bit of a pain.
Below, we’ve outlined the key financial milestones to keep an eye on as you navigate your way through your 50s and beyond.
Age 50: Reclaiming contributions
Once you reach age 50, you become eligible to begin making catch-up contributions to retirement accounts such as Individual Retirement Accounts (IRAs), 401(k), 403(b), and 457(b) plans. If you feel like you may be behind on your retirement savings, this age is the beginning of a period where you can “catch up” and work to get back on track to achieving your retirement goals.
Catch-up contribution limits for 2023 and 2024
In 2023 and 2024, the IRA catch-up contribution limit for individuals age 50 and older is $1,000.
The catch-up contribution limit for employees age 50 and older enrolled in the SIMPLE plan is 3,500.
The catch-up contribution limit for employees age 50 and older who participate in 401(k), 403(b), most 457 plans, and federal thrift savings plans is $7,500.
Age 50: Eligibility for social security benefits for disabled widows/widowers.
A surviving spouse, surviving divorced spouse, unmarried children, or dependent parent may be eligible to receive monthly Social Security survivor benefits based on the deceased worker’s income. A disabled widow or widower who reaches the age of 50 may be eligible for survivor benefits. Whether she can claim benefits as early as age 50 depends on two factors: being a widow or widower and having a disability.
Age 55: Contribution to health savings account
When you turn 55, you become eligible to make additional contributions to a Health Savings Account (HSA). HSAs serve as a great tax-efficient investment tool for saving money to cover future medical expenses. Individuals age 55 and older have the option to make an additional $1,000 contribution to their HSA.
The 55 Rule is an IRS guideline that allows individuals who leave or retire in the calendar year they turn 55 or older to make penalty-free withdrawals from their 401(k) or 403(b) retirement accounts.
Generally, if you withdraw funds before age 59½, you may be subject to a 10% IRS penalty on top of any ordinary income taxes owed. This penalty may be waived if you meet certain criteria under IRS Rule 55.
- age limit: You must quit your job after your 55th birthday. Even if you quit or lose your job, you can still use the Rule of 55. (Eligible federal or state public safety employees can withdraw at age 50).
- Target account: This rule applies only to 401(k) or 403(b) plans, not IRAs. Additionally, you can only use funds in your current employer’s plan.
- Limitations: Your employer’s 401(k) or 403(b) plan must have Rule of 55 available. This does not necessarily apply to all employer plans, and specific rules may vary from plan to plan.
Age 59.5: Start taking penalty-free retirement withdrawals
You may not have celebrated a half birthday in a while, but it’s worth taking note of this year.
Generally, if you take distributions from an IRA or 401(k) before age 59½, you may owe income taxes on the withdrawal amount along with a 10% penalty.
Once you reach age 59.5, you are eligible to withdraw from IRAs and 401(k)s without penalty. There are no penalties for withdrawals, but they may still be subject to income tax.
Note: You do not have to start making withdrawals at this age.
Age 60: Receive social security survivor benefits
If you are a widow or widower, you can begin collecting Social Security survivor benefits at age 60 (assuming you are not disabled).
There are both advantages and disadvantages to choosing survivor benefits before you reach full retirement age (FRA). On the positive side, it extends the period during which survivors receive benefits. However, the downside is that this option may reduce the amount of your survivor benefit.
Age 62: Claim Social Security Retirement Benefits Early
You have the option to start collecting Social Security retirement benefits at age 62. If you choose to claim benefits before you reach full retirement age, you will be subject to a small reduction each month before you reach that milestone.
Age 62: Reverse Mortgage Eligibility
The most common type of reverse mortgage, a Home Equity Conversion Mortgage (HECM), is a government-backed loan available to homeowners age 62 or older. It provides a means for individuals with significant home equity to leverage the value of their property by borrowing against it. This loan gives you immediate access to cash as an additional or primary source of income to help pay your expenses. The loan comes due when the homeowner moves, sells the property, or dies.
There is also a unique reverse mortgage program available starting at age 55. However, these programs are typically offered by private financial institutions and are not federally insured or regulated, leaving lenders with a higher level of risk.
Age 64 + 9 months: Prepare for the initial Medicare enrollment period
Medicare is a complex program with multiple parts and options, each addressing a different aspect of health care.
If you’re eligible for Medicare when you turn 65, you can sign up during the early enrollment period. It is a seven-month period that begins three months before the month in which you turn 65, includes the month in which you turn 65, and ends three months after the month in which you turn 65.
Age 65: Medicare eligibility and additional health savings account considerations
When you turn 65, you become eligible for health insurance under Medicare. If you fail to enroll during the initial enrollment period (see above), you may be subject to a late enrollment penalty for Medicare Part A, Part B, and/or Part D, depending on your circumstances. Coverage starts from the month following enrollment.
Changes to health savings account rules
When you turn 65 or older, several things change regarding your Health Savings Account (HSA). Once you enroll in Medicare, you are no longer eligible to contribute to a health savings account.
You can also use your HSA for non-qualified expenses (withdrawals other than medical expenses) without penalty. However, taxes will still apply to non-qualified withdrawals. Before age 65, HSA money can only be used tax-free for qualified medical expenses. If he withdraws HSA funds for any other purpose, not only will he be taxed on the money, he will also pay a 20% penalty.
Ages 66-67: Understanding Full Retirement Age (FRA)
Full retirement age (FRA) is an important financial planning milestone to keep in mind. Having a clear understanding of your FRA can help you make informed decisions about the best age to start collecting Social Security benefits, increasing your chances of achieving a financially secure retirement .
Receiving benefits before FRA may reduce your monthly benefits, but claiming benefits after FRA may increase your benefit payments.
If you were born between 1943 and 1954, your full retirement age is 66 years. If he was born in 1960, the FRA increases gradually from 1955 until he reaches age 67. People born after 1960 receive full retirement benefits at age 67.
Before you claim your benefits, check your FRA, evaluate your benefits at the different ages you’re considering claiming, and carefully decide whether you’re happy with your decision to claim now or whether you want to postpone and increase your benefits. Important to consider. Amount of retirement allowance.
Age 70: Maximum Social Security benefits reached.
If you have not yet claimed Social Security benefits when you turn 70, you have already reached the maximum benefit amount. Once you’re over 70, your monthly Social Security benefits no longer increase, even if you continue to delay taking benefits.
70.5: Consideration of tax-advantaged charitable donations through QCDs
At age 70.5, charitable individuals can begin taking Qualified Charitable Distributions (QCDs).
With QCD, you can direct your IRA administrator to transfer up to $100,000 of funds directly from your IRA to a qualified charity. Amounts donated through a QCD are not included in taxable income.
Couples who file a joint tax return are eligible to receive an annual QCD of up to $100,000 each and $200,000 in total. Starting in 2024, the annual QCD limit will be indexed to inflation and the QCD limit will increase to $105,000.
Ages 73-75: Demystifying the required minimum distribution rule
Required minimum distributions (RMDs) are mandatory withdrawals that must be taken from employer retirement savings plans such as IRAs, SEP IRAs, SIMPLE IRAs, and 401(k)s after a certain age. RMD rules define how much you need to withdraw and when you need to withdraw it.
Considering recent legislation, the age of an RMD may vary depending on date of birth. If you were born:
- RMD has already started before January 1, 1951
- Between January 1, 1951 and December 31, 1959, RMDs must begin at age 73.
- After January 1, 1960, RMD begins at age 75.
Track your financial milestones with NewRetirement Planner
Thankfully, you don’t have to worry too much about tracking all of these financial milestones yourself. With the NewRetirement Planner Insights feature, many of the milestones listed above will appear in the timeline of milestones within your plan.