Upon entering your 50s, it’s not unusual to start taking personal finance more seriously, if you weren’t already. You might be aware that certain ages play a crucial role in financial planning opportunities, but staying on top of these significant milestones can be a bit of a chore.
Below, we’ve outlined important financial milestones to be aware of as you navigate your 50s and beyond.
Age 50: Catch Up Contributions
Upon reaching the age of 50, you become eligible to start making catch-up contributions to retirement accounts such as Individual Retirement Accounts (IRAs), 401(k)s, 403(b)s and 457(b) plans. If you feel that you might have fallen behind in your retirement savings, this age marks the beginning of a period during which you can “play catch-up” and work towards getting back on track with your retirement goals.
2023 and 2024 catch-up contribution limits
For 2023 and 2024, the IRA catch-up contribution limit for individuals aged 50 and over is $1,000.
The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is 3,500.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $7,500.
Age 50: Disabled Widow/Widower Social Security Benefits Eligibility
A surviving spouse, surviving divorced spouse, unmarried child, or dependent parent may be eligible for monthly Social Security survivor benefits based on the deceased worker’s earnings. A disabled widow or widower who reaches age 50 becomes eligible for survivor benefits. The ability to claim benefits as early as age 50 is contingent on two factors: being a widow or widower and having a disability.
Age 55: Catch-up Contributions to a Health Savings Account
At age 55, you become eligible to make catch-up contributions to a Health Savings Account (HSA). An HSA can serve as an excellent tax-efficient investment tool for saving money to cover future medical expenses. Individuals aged 55 and older have the option to make an additional catch-up contribution of $1,000 to their HSA.
The Rule of 55 is an IRS guideline that allows individuals who leave their job 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.
Typically, withdrawing funds before the age of 59.5 can result in a 10% IRS penalty on top of the regular income tax you owe. The ability to meet specific criteria under the IRS’ Rule of 55 could potentially exempt you from this penalty:
- Age Requirement: You must leave your job on or after your 55th birthday. You can use the Rule of 55 whether you quit or lose your job. (Qualified federal or state public safety employees can make withdrawals at 50).
- Eligible Accounts: This rule only applies to 401(k) or 403(b) plans, not IRAs, and you can only use the funds you have in your current employer’s plan.
- Limitations: Your employer’s 401(k) or 403(b) plan must allow you to take advantage of the Rule of 55. It doesn’t necessarily apply to all employer plans, and the specific rules may vary between plans.
Age 59.5: Begin Penalty-Free Retirement Withdrawals
You likely haven’t celebrated your half-birthday in quite some time, but this year, it’s worth taking notice.
Generally, if you take a distribution from an IRA or 401(k) before age 59.5, you will likely owe income taxes as well as a 10% penalty on the amount that you withdraw.
Once you’ve turned 59.5, you are eligible to withdraw from IRAs and 401(k)s penalty-free. While the withdrawals are penalty-free, they may still be subject to income taxes.
NOTE: It’s not required that you begin making withdrawals at this age.
Age 60: Receiving Social Security Survivor Benefits
If you are a widow or widower, you can begin receiving Social Security survivor benefits as early as 60 (assuming you are not disabled).
Opting for survivor benefits before reaching Full Retirement Age (FRA) comes with both advantages and disadvantages. On the positive side, it extends the duration for which the survivor receives benefits. However, the downside is that this choice may lead to a reduction in the survivor’s benefit amount.
Age 62: Claiming Your Social Security Retirement Benefit Early
You have the option to begin receiving your Social Security retirement benefits at the age of 62. Should you choose to claim benefits before reaching your Full Retirement Age, they will be subject to a minor reduction for each month before reaching that milestone.
Age 62: Reverse Mortgage Eligibility
A Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is a government-insured loan accessible to homeowners aged 62 and above. It provides a means for individuals with substantial home equity to leverage their property’s value by borrowing against it. This loan can make cash readily available as an additional or main income stream to help pay for expenses. The loan becomes due when the homeowner moves, sells the property, or passes away.
There are also proprietary reverse mortgage programs available to individuals as early as age 55. However, these programs are typically provided by private financial institutions and lack federal government insurance and regulation, which means that lenders assume a higher level of risk.
Age 64 + 9 Months: Preparing for Your Medicare Initial Enrollment Period
Medicare is a complex program with multiple parts and choices, each addressing distinct aspects of healthcare.
If you’re eligible for Medicare when you turn 65, you can sign up during your Initial Enrollment Period. This is a 7-month period that begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65.
Age 65: Medicare Eligibility and Additional Health Savings Account Considerations
Upon turning 65, you are eligible for health care coverage under Medicare. If you fail to enroll during the Initial Enrollment Period (see above), you might be subject to late enrollment penalties for Medicare Part A, Part B and/or Part D, depending on your circumstances. Coverage begins the month after you enroll.
Changes to Health Savings Account Rules
A few things change with regards to Health Savings Accounts, or HSAs, once you are age 65 or older. Once you are enrolled in Medicare, you are no longer eligible to make Health Savings Account contributions.
You also are able to use your HSA for non-qualified expenses (i.e. non-medical withdrawals) without penalty. However, taxes are still applied for non-qualified withdrawals. Before age 65, the money in an HSA can only be used tax-free for qualified medical expenses. If you withdraw your HSA funds for anything else, the money will not only be taxed, but you will also pay a 20% penalty fee.
Age 66-67: Understanding Your Full Retirement Age (FRA)
Your Full Retirement Age (FRA) is an important financial planning milestone to keep in mind. Having a clear grasp of your FRA will empower you to make a well-informed decision regarding the optimal age to begin receiving your Social Security benefits, increasing the likelihood of achieving a financially secure retirement.
Taking your benefits before FRA can reduce your monthly benefit, while claiming benefits after FRA can result in an increase in your benefit payment.
The Full Retirement Age is 66 if you were born from 1943 to 1954. The FRA increases gradually if you were born from 1955 to 1960, until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67.
Prior to claiming your benefits, it’s essential to verify your FRA, assess your benefits at various ages you’re contemplating for claiming, and carefully consider whether you’re content with your decision to file now or if you’d prefer to delay and increase the size of your retirement benefits.
Age 70: Reaching your Maximum Social Security Benefit
If you haven’t yet claimed your Social Security benefits upon turning 70, you have now reached your maximum benefit. After you’ve crossed the 70-year mark, your monthly Social Security benefit stops increasing even if you continue to delay taking benefits.
70.5: Looking at Tax-Advantaged Charitable Contributions through QCDs
When you hit 70.5 years old, charitably-minded individuals can start taking advantage of Qualified Charitable Distributions, or QCDs.
With a QCD, you can instruct your IRA custodian to make a direct transfer of funds from your IRA to a qualified charitable organization, up to $100,000. The amount donated through a QCD is not included in your taxable income.
Couples who submit tax returns with married filing jointly status each qualify for annual QCDs of up to $100,000, for a potential total of $200,000. Starting in 2024, annual QCD limits will be indexed for inflation, and the QCD limit is increased to $105,000.
Age 73-75: Demystifying the Required Minimum Distribution Rules
Required Minimum Distributions (RMDs) are mandatory withdrawals that must be made from IRAs, SEP IRAs, SIMPLE IRAs, and employer retirement savings plans like 401(k)s after a certain age. RMD rules define how much you must take out and when you need to make your withdrawal.
Given recent legislation, your RMD age may vary depending on your date of birth. If you are born:
- Before 1/1/1951, your RMDs have already started
- Between 1/1/1951 and 12/31/1959, then your RMDs must start at age 73
- After 1/1/1960, then your RMDs will begin at age 75
Keeping Track of Your Financial Milestones With The NewRetirement Planner
Thankfully, you don’t have to worry too much about keeping track of these financial milestones all by yourself. You can take advantage of the NewRetirement Planner Insights feature where you will find many of the milestones mentioned above under Timeline of Milestones in your plan.