There are several different retirement plans and benefits available. Your age is most definitely a factor in terms of what penalties you might/might not have to pay as well as how much you’re eligible to receive from Social Security at the time of retirement.
For those 49 and under
If you start saving early for your retirement, you have the best advantage in several ways. Not only does it give you time to accrue as much as possible, but you also get to take advantage of compounding interest returns. Retirement account savings can also be beneficial as far as receiving tax breaks. When it comes to your 401k, workers can invest up to $19,500. Then they have the option of investing another 6k into a Roth IRA.
Many experts say that Roth accounts are great for those younger employees as you pay tax now and then as wages increase, your money can grow tax-free. Once you hit age fifty you have the opportunity to deposit even more into your retirement accounts, as those fifty and older qualify for 401k catch-up contributions. In 2020, this catchup contribution can total up to 26k. Plus, you’re allowed to deposit an extra 1000.00 into your Roth IRA.
These catch-up contributions can be crucial for older workers and they can put even more into retirement accounts while also qualifying for a larger tax deduction. And in those years before retirement, this can certainly be a very good thing! One thing that does make sense is to discuss all possible options and scenarios with a financial planner. They can steer you in the right direction given age, income, financial goals, and savings.
For those age 55
Some people do opt to retire at 55. If this is your plan, be aware that you are allowed to take penalty-free withdrawals from the retirement account connected to the job you most recently held. At 55 while you do get to avoid the ten percent early withdrawal penalty, income tax still does apply to 401k distributions. Keep in mind also, if you opt to roll the 401k over to an IRA you will have to wait until you turn 59 ½ to take the money out without any penalties attached.
For those age 59 1/2
Once you do reach the age of 59 ½ the early withdrawal penalty on IRA’s is over. That said, income is due on every withdrawal you make from the IRA.
For those age 62
Yes, at 62 you do have the option of starting to collect social security. However, if you do choose to collect, the amount of social security for which you are eligible will be less than it otherwise would be. For example, if full retirement age for you is 67 and you start taking social security at 62, you are looking at receiving about 30% less than if you’d waited until 67.
Keep in mind also, if you do continue to work after receiving social security, the benefit checks could be held back/lessened if you make over the allowable limit. That limit currently is set at $18,240. So for every $2 above and beyond this number you earn, your social security check will be reduced by $1.
For those age 65
Once you reach the age of 65 you are eligible to receive Medicare benefits. The enrollment period starts three months before you turn 65. You want to be sure that you sign up promptly, as the Medicare Part B premiums go up 10% for every 12 months you were eligible but failed to enroll.
For those age 66
For those born between the years 1943-1954, you can receive your full social security benefits starting at age 66. If you were born between 1955 and 1959 that age increases to anywhere from 66 and two months to 66 and ten months. So for instance, if you were born in 1957, you can receive full social security beginning at age 66 and six months. Upon reaching the determined age, you can also continue to work and still receive benefits without incurring any penalties.
For those age 70
Did you know that you can increase your social security payments if you wait until you’re seventy to receive them? For each year after you reach full retirement age, social security payments increase by 8% until the age of seventy. So there is some benefit to waiting if you can afford to do so.
For those age 72
Upon reaching age 72 you are usually required to take annual withdrawals from any retirement plan and consequently pay income tax on it. The first distribution has to be taken by April 1 of the year after turning 72. Successively, you must take annual withdrawals by December 31 of each year.
There are though some exemptions to the withdrawal policy. For 2020, the minimum distribution requirement is suspended. Retirees, therefore, do not have to take distributions until 2021. Also, if you work for a company that is not owned by you, you can delay withdrawals from any 401k associated with that company until you retire.
First Union Lending has been working with small businesses across the country—some in their early phases, and some helmed by owners nearing retirement. Ensuring that your business stays afloat, and what’s more, stays profitable will only make for a smoother retirement process. If you do require additional capital to help you through, we more than likely have a program suited to your needs. Each loan product is custom-tailored specifically for your business. And in some cases, the money can be in your account within two business days. Not to mention, funds can be utilized for whatever project you have in mind—even if you just need cash to weather the storm. Call today to see how we might be able to help your small business.