Driving a car at 16, voting in elections at 18, your first legal drink at 21... these significant ages are etched into our cultural consciousness. Unfortunately, retirement milestones aren't quite as front and center as many other important save-the-dates -- but they should be.
Our retirement investment advisors often speak with clients about the sign posts to look for along the road to retirement to help them plan for the future. You're definitely not alone on your journey; since 2010, 10,000 people hit the age-65 milestone every day -- and will continue to do so until 2029. This retirement timeline can help you decide which steps you need to take and when you need to take them in order to secure your retirement.
Under Age 49: Retirement and Strategic Financial Planning
For many, until you hit age 49, you're in the accumulation phase, so focus on making retirement part of your comprehensive financial plan and emphasize building those retirement and savings accounts. If your employer offers a 401(k), contribute as much as you can -- the limit is $17,500 for 2014 -- and try to maximize your employer's match. Speak with your wealth advisor about incorporating retirement into your strategic financial planning process.
The 50s: Wealth Management Strategies
Once you hit age 50, you can make so-called "catch-up contributions" to your IRA. If your employer allows it, take advantage of the opportunity to stockpile an extra $5,500 into regular and safe harbor 401(k)s and an extra $2,500 to SIMPLE 401(k)s each year.
When you're age 55 or older, you can leave your job and begin collecting from your 401(k) without accruing the 10 percent federal tax penalty that applies to early withdrawal. However, you'll still have to pay income taxes on any withdrawals you make.
At age 59 1/2, you can withdraw from your IRA without penalty but again, it'll be counted as income and taxed. If you're still working at this age and want to take distributions, check with your employer, as some don't allow withdrawal while you're still employed.
The 60s: Advice from 401k Advisors
If you're a widow or widower, you can claim survivor Social Security benefits at age 60; however, your payments may be reduced by as much as 28.5 percent if you claim then before age 62. Plus, if you're still working, your payments can be reduced further... or even eliminated.
For non-survivor benefits, age 62 is the magic number. You're now eligible for Social Security, but the earlier you take it, the less you'll get -- up to 25 percent less. And if you're still working, your SS payments will be reduced, too. At age 65, Medicare kicks in. (If you're claiming SS, you're automatically enrolled.)
When you turn 66 and if you were born before 1960, you're eligible to claim full SS benefits, and you won't be subject to any penalties if you're still working. If you were born in 1960 or later, you'll have to wait for full SS benefits until age 67.
The 70s: Financial Strategies
If you reach your 7th decade without claiming Social Security, congrats! You earned about 8 percent more in payments every year you delayed, from age 67 to 70. At age 70, however, the increases stop, so you may as well start collecting your payments now.
Finally, when you hit age 70 1/2, you have to start withdrawing. If you have retirement accounts that are taxed as income, start taking your annual required minimum distributions. That is, of course, unless you want to owe up to 50 percent in tax penalties!
Your retirement investment advisor will walk you through these milestones and help you prepare for a successful retirement.