Six Birthdays You'll Either Love or HateWhen we're young there's always a birthday to look forward to, whether it's getting a drivers license at 16 or being able to buy a drink at 21. But there comes a point where most people stop looking forward to the next birthday.
But if you're approaching retirement age, there are several birthdays at which certain benefits and entitlements kick in, giving you something to look forward to as you hit your golden years. Here are six age milestones to mark on your calendar:
Age 59 ½
You may have been in preschool the last time you counted half birthdays, but the Social Security Administration still does. When you turn 59½, you can celebrate by starting your withdrawals from your retirement plan or IRA. You can finally do so without being subject to the 10% penalty you'd generally have to pay at a younger age.
This is the earliest that a widow or widower can collect benefits from Social Security (if the surviving spouse is disabled, this benefit kicks in at age 50). As a general rule, early survivors benefits will give about the same total Social Security survivors benefits over the course of a lifetime. However, the installment amounts will be smaller to take into account the longer period you will receive them.
You can receive these benefits at any time between your 60th birthday and your full retirement age as a survivor. However, the earlier you start, the more your survivor's benefits are reduced -- they will dwindle at a fraction of a percent for each month before your full retirement age.
Regardless of when you reach your full retirement age, you can choose to begin receiving social security retirement benefits at age 62. However, if you start taking benefits before your full retirement age, those proceeds will be reduced.
If your full retirement age is 67, then your starting benefits will be reduced by 30%. That percentage goes down the closer you get to your full retirement, with a 6.7% reduction for withdrawing at age 66. Age 62 also marks the point when you are old enough to qualify for a reverse mortgage.
Somewhere between the ages of 65 and 67 is when you'll reach your full retirement age, which is when you can begin to collect full Social Security benefits. When your specific retirement age hits depends on how old you are. It was 65 for anyone born 1937 or earlier, and gradually increases to age 67 for anyone born on or after 1960. You can use this chart from the Social Security Administration to determine your exact retirement age.
If you don't need to dip into your Social Security benefits when you hit full retirement age, you can delay your retirement, and your benefits will be increased based on your birth date. However, once you reach age 70, the benefit increase no longer applies, even if you continue to delay taking benefits.
Age 70 1/2
Another half birthday to celebrate at age 70½ is when you must begin taking your required minimum distributions from your IRAs, whether you've retired already or not. RMDs apply each year beginning with the year the account owner turns age 70 ½. The distributions are calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy.
In order to figure out your applicable distribution period or life expectancy you can use the tables supplied by the IRS's Web site (see appendix C).