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Retirement Planning - What To Do When

Mark Zaifman   |    Wed, May 02, 2012 @ 05:01 PM

 when to start retirement planning

It's never too early to begin thinking about retirement planning, so no matter where you are in the process, check out these guidelines on what to do when.

21 - Once you are 21 years old, and an employee of a firm that offers one, you can join a 401 (k) plan. It’s not easy, but if you start saving early, you’ll be way ahead of the game. Check out the TED talk on personal finance given by LearnVest CEO and Founder Alexa von Tobel - and while you're at it, you should sign up for her blog. In regards to retirement, von Tobel says, "It may seem like it’s light-years away, but the earlier you start saving, the longer time horizon you’re giving your investments to grow." This not-yet-30 woman is super savvy when it comes to personal finance.

50 - Turning 50 does have it's benefits. In 2012 the contribution limit for the 401(k), 403(b) as well as the fed's Thrift Savings Plan is $22,500 for those 50+. That is $5,500 more than younger people can deposit in the same accounts. And another benefit - as an older employed person, you'll be able to save $1,000 more than your younger colleagues with a traditional or Roth IRA.

55 - For 401(k) and IRA changes, check out the Planning to Retire article in USA News & Money. If you retire in the calendar year (or later) that you turn 55, you can take 401(k), but not IRA, withdrawals and not pay the 10% early withdrawal penalty. 

59 1/2 - Ending at age 59 1/2 is the 10% early withdrawal penalty on IRA withdrawals. Note: you are not required to take distributions until after age 70 1/2.

62 - As an employee, you are eligible to sign up for Social Security benefits at 62, but if you begin payments now, your payout will be reduced. In other words, if you were born in in 1950 and you sign up for social security at 62, you'll get 25% less per month than if you wait until 65 to claim your benefits. 

65 - At 65, you are eligible for Medicare. Initial enrollment starts 3 months before the month you turn 65 and ends 3 months after your birthday. You should sign up as soon as you are eligible because Medicare Part B premiums increase by 10 % for every 12-month period you don't enroll. 

66 - Those born between 1943-1954 qualify for the full amount of Social Security they have earned at age 66. Between 1955-1959, the retirement age increases from 66 and two months to 66 and 10 months. When you reach your full retirement age, you can work and claim Social Security payments at the same time without any payment withheld.

67 - Eligibility for unreduced Social Security payments for employees born in 1960 or later begins at age 67.

70 - If you can manage, you may want to delay claiming Social Security until 70, since payments will grow by 8% per year, every year you delay claiming - up until 70.  In addition, if you wait until 70, when you pass away, your spouse can continue the higher benefit. After 70, there is no benefit to delaying Social Security payments.

70 1/2 - After 70 1/2, withdrawals from 401(k)s and IRAs are required. If you don't withdraw the correct amount, you'll have to pay a 50% excise tax on the amount you were supposed to have taken out. The first April 1 (after you turn 70 1/2) is when the first distribution is due. Then, annual withdrawals are required by December 31 every year. 



'Pushing 65' by Keith Williamson