In order to manage your money well after retirement, you'll need to find a good balance between the freedoms and restrictions. Retirement planning isn't an exact science. However, we can use information and tools available to us at each stage of life to make reasonable assumptions and choices to better prepare us for our golden years.
|50||Beginning at age 50, you're allowed to make larger "catch-up" contributions to your Individual Retirement Account (IRA) and 401(k). The extra savings allow you to maximize your retirement savings while allowing you to select how these contributions are saved or invested. You can also add an additional $1,000 more than younger counterparts in a Traditional or Roth IRA.|
|55||Retirees who leave their job during the calendar year that they turn 55 or later can take 401(k) (but not IRA) withdrawals without having to pay the 10 percent early withdrawal penalty.|
|59½||The 10 percent early withdrawal penalty on IRA withdrawals ends at age 59½. However, you aren't required to take distributions until after you reach age 70½.|
|65||Medicare eligibility begins at age 65. The initial enrollment period starts three months before the month you reach age 65 and ends three months after your next birthday. It's a good idea to sign up right away because Medicare Part B premiums will increase by 10 percent for each 12-month period you were eligible for benefits but did not enroll. If you or your spouse is covered by a group health plan based on your current employment, you should sign up within eight months of leaving the job or health plan to avoid the higher premiums.|
|67||The Social Security full retirement age is higher for younger workers. Eligibility for unreduced Social Security payments for workers born in 1960 or later begins at age 67.|
|70||Social Security payments continue to grow by 8 percent per year for each year you delay claiming until age 70. After age 70, there's no additional benefit to delaying Social Security payments.|
|>70½||Withdrawals from 401(k)s and IRAs (Traditional and SEP) become required after age 70½. You could face a possible 50 percent excise tax on the amount that should have been taken out if you fail to withdraw the required amount. The first distribution is due by April 1 of the year after you turn 70½. After that, annual withdrawals will be required by Dec. 31 each year. If you delay your first withdrawal until April, you'll need to take two distributions in the same year. Two distributions in the same year could possibly push you into a higher tax bracket.|
Most of your planning should depend on how much you'll need to spend. Think about where you spend money now and whether you'll need to continue this in retirement. The general rule is that your expenses in retirement will be between 70 percent and 85 percent of what they are pre-retirement, but yours will vary depending on your lifestyle.
If you have a mortgage, it may be gone by the time you stop working, so your housing expenses will drop. On the other hand, as you get older, medical expenses may rise. Fine-tune your investments to reduce risk, increase income or grow capital during this phase of life—certificates are a good option.
Work with a financial advisor to guarantee that your retirement income is sufficient to meet your immediate needs and will support the lifestyle that you choose throughout retirement.