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Unforgettable Birthdays
Birthdays may seem less important as you grow older. They may
not offer the impact of watershed moments, such as getting a driver’s
license at 16 and voting at 18. But beginning at age 59, there are several
key birthdays that can affect your tax situation, health-care eligibility,
and retirement benefits.
59˝ — You can start taking penalty-free withdrawals from IRAs
and qualified retirement plans, provided certain conditions are met.
Ordinary income taxes generally apply to these distributions. (Withdrawals
taken prior to age 59˝ are subject to a 10% federal income tax penalty.)
62 — You are eligible to start collecting Social Security
benefits, although your benefit will be reduced by up to 30%. To receive
full benefits, you must wait until “full retirement age,” which ranges from
65 to 67, depending on the year you were born.
65 — You are eligible to enroll in Medicare. Medicare Part A
Hospital Insurance benefits are automatic for those eligible for Social
Security. Part B Medical Insurance benefits are voluntary and have a
monthly premium. To obtain coverage at the earliest possible date, you
should generally enroll about two to three months before turning 65.1
70˝ — You must start taking minimum distributions from most
tax-deferred retirement plans or face a 50% penalty on the amount that
should have been withdrawn. Annual required minimum distributions are
calculated according to life expectancies determined by the federal
government.
1) 2006 Social Security Manual, The National
Underwriter Company
© 2007 Emerald Publications
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