The Investment Link<sup>®</sup> Team

The Investment Link® Team


Top 7 Retirement Milestones You Need To Know

Top 7 Retirement Milestones You Need To Know
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We have planned and prepared for every important milestone in our lives. Preparing for retirement is no different. It is not as simple as giving your two weeks’ notice and going off to enjoy your retirement years. It’s much more involved than that and if you want to do it right, it takes some preparation.

There are many steps you will need to take to ensure you are starting off on the right path. First, answer these five questions:

► Do I have enough savings to retire and stay retired?
► If I do, how much is it going to cost me to manage my funds and create my retirement income?
► How will my savings generate a lasting income?
► How will I know if I am in danger of running out of funds during retirement?
► At what age should I begin collecting my Social Security?

These are just a few of the key questions you will need to start with when thinking about retirement. Once you know the answers to them, you will see on the timeline below how there is still a chance to change some of those answers.

How much savings do I need to retire? The Retirement Buckets® Income Plan can help you determine if you have enough savings to retire and stay retired.

Age 50

Congratulations! You are now eligible to take advantage of Catch-Up Contributions. This means you can make an extra $1,000 contribution to your IRA accounts, increasing it to $6,500 (IRS phase-out limits apply), as well as an extra $6,000 to your employer-sponsored retirement plans, increasing the annual elective contribution limit to $25,000.

Age 59 ½

You may be able to access the assets in your employer-sponsored retirement plan (restrictions may apply) through a little known strategy called In-Service Distributions. This would enable you to rollover the assets to your IRA account while still employed, which would allow you to access a significantly greater investment choices and products.

Age 62

This is the earliest age that you are eligible to file for Social Security benefits. However, if you file prior to your Full Retirement Age (FRA) you will only be eligible to receive a reduced benefit. For example, if you file at age 62, you will receive 70-75% (depending on your date of birth) of your total FRA benefit.

It’s important to note, that spousal benefits are also affected by the decision to receive benefits early. Since the spouse may claim 50% of the higher earner’s benefit, the decision to file prior to FRA also permanently reduces spousal benefit as well.

Age 65

You are now eligible to enroll in Medicare and no longer have to rely on your employer or private health insurance plans. To avoid paying higher Medicare premiums for coverage (penalty) you need to sign up for Medicare benefits during a 7-month window, including the three months before you turn 65, your birth month, and three months after.

Age 66 – 67

For the majority of baby boomers (born between 1943 and 1954), the Full Retirement Age (FRA) will be 66. For those born in 1955 and after, the FRA gradually increases to age 67.

Age 70

If you decide to delay receiving Social Security benefits beyond your FRA, you will receive a Delayed Retirement Credits (DRC) of 8% for each year until you reach age 70.

Age 70 ½

You are now required to begin taking Required Minimum Distributions (RMD) from your Traditional retirement accounts, or you will have a 50% tax penalty on the amount that should have been taken out. RMDs, however, do not apply to Roth retirement accounts.

Try The Retirement Buckets® Income Plan to help you determine if you have enough savings to retire and stay retired.


The Important First Step

The retirement timeline only gives you a glimpse at the preparations that must be done before submitting your resignation letter. The key to having a successful retirement is to know how much you will need monthly. Start now and write down all the expenses you currently have. Remove some expenses that might be paid off by the time you retire; for example, the car or the house. Add in any additional expenses you anticipate; annual travel budget, supplemental insurance, hobby costs.

When creating a budget for your retirement income, it is not possible to account for every expense or unexpected incidentals, but it is important to get as accurate of a financial plan as possible. Going back to work because you underbudgeted would not be an ideal outcome for retirement. Start now, make a plan and manage it going into your retirement to ensure you stay on track.

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