There are some deadlines when planning for retirement that could really hurt you if you miss them. Emily Brandon of U.S. News & World Report lists twelve notable ages and dates for which to prepare in her article “12 Important Retirement Planning Deadlines.” If you don’t pay close attention to the rules of Medicare, Social Security, and 401k planning, you could end up paying more in taxes, fees, and even penalties. Reading this article, I wanted to immediately share it with everyone I know who is nearing 50 because the information is quite valuable. Some of the penalties you’ll receive include missing out on certain Medicare plans, something that cannot be undone. Pay attention before the deadlines hit.
Whether you are on point or behind in your retirement savings, 50 is the age where you can increase your contributions to 401k’s and IRA’s. Once you turn 50, you can contribute $23,000 yearly to your retirement savings plan. You can also add $1,000 per year to the $5,500 that everyone else can put into IRA’s. While you will still pay income tax on your 401k and IRA distributions at age 59 1/2, you no longer have to pay the 10% early withdrawal penalty. At 62, workers are able to start receiving Social Security payments, but hold off if you can. Your payments could be around 30% less if you start receiving them at 62, rather than waiting until 66 or 67. Payments can also be withheld if you are still working at this age.
Age 65 is important because you become eligible for Medicare. Pay attention to the fact that you can enroll as early as three months before your birthday, but if you don’t enroll by four months after, you have the potential to lose a lot. Premiums for Medicare Part B and D could increase to a higher permanent level and you might even be denied supplemental coverage. By not signing up for Medicare Part B on time, you get a late enrollment penalty as well as 10% added to your premium for every year you are late signing up. If you want to buy a Medigap policy in your state, you can do so for six months after turning 65 guaranteed. If you don’t do it in that time frame, costs could be higher or you could be denied altogether.
Most Baby Boomers are eligible for their full Social Security payments once they turn 66. The age increases the younger people are until age 67 for people born in 1960 or after. Once you reach your full Social Security age, you won’t be penalized for taking payments while you are working. If you wait longer than your full retirement age to start receiving Social Security, your payments will increase 8% each year until age 70. After that age, payments will not increase any further. The final important age is 70 1/2. At this point, you have to start taking payments from your 401k’s and IRA’s. The penalty is huge if you don’t take out enough each year. You’ll pay half of the amount that you should have withdrawn in taxes if you don’t follow the withdrawal rules. If you are still working, you can delay receiving money from your 401k until 6 months after you retire. Once you withdraw the money and pay your income taxes, you can buy an annuity or invest elsewhere with your income payment.
In addition to the ages, there are a few deadline dates to keep in mind yearly as well. Your 401k contributions as well as required minimum distributions need to be made by December 31 of each year. If you are taking your first required 401k distribution, you have until April 1 of the following year. You might not want to wait though because then you will have to take two distributions in the same year and your taxable income skyrockets. April 15 has always been a significant date because of taxes, but it is also the deadline for making IRA contributions for the previous year. You’ll get big tax savings in addition to helping save for retirement.
This retirement information is helpful to every age group, because although I am not yet at the first age, I know exactly what deadlines that I don’t want to miss. Pass on these retirement deadlines to your friends, family, and clients so that they don’t miss out on anything or get steep penalties and additional taxes.
Written by Rachel Summit