The shouts of “surprise” by party attendees. Black balloons. Seemingly countless candles on a birthday cake. Numerous decorations referring to the ravages of old age that accompany the endless teasing about advancing years.
It must be a milestone birthday.
Milestone birthdays go beyond nostalgic recollections that look at the years past. They are about looking forward. While memories fade, the need for proactive planning when it comes to future finances remains vibrant.
While 65 is a prominent milestone where Medicare and Social Security become available, other deadlines exist before someone enters their mid-sixties. Adhering to those timelines can help make the most of investments while avoiding government penalties and saving on taxes.
- Age 50: Even if you regret not saving more money in preparation for retirement, the time to act is at the dawning of your sixth decade. Catch-up contributions can help workers 50 and older set aside money and defer taxes in 401(k) and 403(b) plans. Those who have traditional or Roth IRAs can go beyond the contribution limit by $1,000.
- Age 55: Those out of a job through retirement, resignation or layoff can withdraw money from their 401(k) in that same calendar year and avoid the 10% early withdrawal penalty. However, the account must be associated with the job most recently left.
- Age 59½: Say goodbye to the 10% early withdrawal penalty on retirement account distributions. However, income taxes will be a factor.
- Age 62: Social Security payments begin. However, holding off may be a better decision. Signing up early could permanently reduce payments by 30%. Also, continuing to work while collecting benefits can lead to payments being temporarily withheld.
With or without grandiose milestone birthday parties, no one wants to get older. However, the financial benefits are reason enough to embrace both the present and the future.