It is true; there are several major milestone birthdays to be aware of that will allow you to make changes to your financal situation or health care based your age.  You don't want to miss them, because they can cost you in the long run.  Below are some of the key ages you need to be aware of.  However, there may be more based on your personal situation. 

Once you reach age 50 you are eligible to make catch up contributions to retirement plans and IRA's.  If you participate in a 401(k) you can add an additional $7,500 to your contributions, for a total of $30,500.  In a SIMPLE IRA you can add $3,500 more, for a total of $19,500.  If you add money to an IRA or a Roth IRA, you can put in an additional $1,000, to get you to $8,000.  All these numbers are for 2024.

Age 55 is when you are first eligible to take penalty-free distributions from 401(k)'s if you are no longer employed by that employer.  If you are separated from service (through permanent layoff, termination, quitting or taking early retirement) in the year you turn 55 or later, there is no 10% penalty for early withdrawals from that employer's 401(k). Each plan is different so please consult your plan document for additional information.

When you turn age 59 1/2 you are able to take penalty-free distributions from IRA's, qualified plans, and Roth IRA's (if at least 5 years old).  Taxes may still be due, but no penalties will be assessed due to age.

At age 62 you have the ability to apply for reduced Social Security retirement benefits under your own earnings record or your spouse's earnings record. If you are eligible for Social Security survivor benefits those may start as early as age 60 (50 if disabled).

Ability to apply for Medicare (Parts A & B) beginning 3 months before your 65th birthday.  Medicare premiums are based on your income.  We can assist with income planning to help avoid increased premium costs. If you have coverage through an employer-sponsored plan you may elect to stay on that plan and not apply for Medicare. However, when you lose coverage through that plan you have 3 months to sign up for Medicare to avoid higher premiums in the future. 

Once you turn age 70 1/2 you can make distributions from your IRA payable directly to a qualified charity through what's called a Qualified Charitable Distribution (QCD). The amount distributed to the charity is generally not includable in your income for the year.  Please contact our office if you would like to take advantage of this to benefit your favorite charities. You should also consult your tax advisor on how QCDs might impact your tax situation.

The calendar year in which you turn 73 is when you HAVE to start taking Required Minimum Distributions (RMD's) from your Traditional IRA's and depending on your situation, your retirement plans as well.  You can delay your first distribution until April 1st of the following year, but then you will have to take two distributions in the same year, which may cause additional tax liability for you.  Please contact your tax advisor with questions.

Baird does not offer tax or legal advice so please consult your tax or legal professional for information specific to your situation.