"The days are long but the years are short" is often said by parents, but it's also a phrase that very much applies to the time between starting your first 'real' job and the day you retire. Life takes over and it's a flurry of activity; marriage, having kids and buying a home are all important milestones for many people. There are also a series of milestone ages on your way to retirement that are important to know about as they open up opportunities to save more, avoid penalties and qualify for benefits. And two of these milestones require you to either act, or be subject to additional taxes and/or penalties.
The SECURE 2.0 Act has significantly changed retirement savings rules in recent years. Those changes include, but are not limited to: a new required minimum distribution (RMD) age and increased catch-up contributions for those aged 60 to 63.
Take note of these seven milestone ages on your way to retirement. You don't want to miss any these opportunities or important deadlines.
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1. Age 50. You can make catch-up contributions to your retirement accounts
Why make so-called catch-up contributions? If a job loss or another life event caused you to dip into retirement savings, you took time off to be a caregiver, your previous earnings were insufficient or your anticipated income needs in retirement have increased, you may want to make catch-up contributions. And these contributions could also lower your taxable income and potentially reduce your overall tax liability.
Age 50+ catch-up contribution limits 2024
401(k), 403(b), SARSEP and 457 (b) and SIMPLE 401(k) catch-up amounts. For 2024, the standard annual deferral limit for 401(k), 403(b), SARSEP and 457 (b) plans is $23,000, and the catch-up contribution limit for those age 50 and older is $7,500. That means an active participant 50 or older can contribute up to $30,500 this year.
IRA catch-up amounts. You can make catch-up contributions to your traditional or Roth IRA up to $1,000. Catch-up contributions to an IRA are due by the due date of your tax return, not including extensions.
SIMPLE plan catch-up amounts. The catch-up contribution limit for employees 50 and over who participate in SIMPLE 401(k) plans remains $3,500 for 2024. So the total you can contribute is $19,500 in 2024 if you are older than 50.
Starting in 2025, higher 401(k) catch-up contribution limits for those aged 60-63. If you’re 60, 61, 62, or 63 in 2025, you can use this new rule to increase your 401(k) savings for retirement. For 2025, the catch-up limit for those aged 50 and over is $7,500 and the higher catch-up contribution limit for those age 60-63 is $11,250.
The new catch-up contribution limit in 2025 for SIMPLE IRAs will increase to the greater of $5,000 or 150% of the regular age 50 catch-up contribution limit for SIMPLE IRA plans. This supersized catch-up contribution is $5,250 for 2025, for a contribution total limit of $21,750, which still lags behind 401(k) limits. Cost of living adjustments to the catch-up limit will begin in 2026.
To qualify for the super catch-up contributions, you must meet specific criteria: be 60, 61, 62, or 63 on December of the calendar year and generally, have already contributed the maximum deferral amount. Once you turn 64, your contributions revert to the standard age 50+ catch-up limit.
2. Age 59-1/2. No more early withdrawal penalty for retirement account distributions
The 59-1/2 rule imposes a 10% penalty on early IRA or 401(k) withdrawals made before you reach age 59-1/2. There are some hardship exemptions from the rule and you can learn more about them on the IRS web site.
There is one way around this rule, you can take substantially equal periodic payments (SEPP) and not be subject to additional penalties. This option would work well for someone planning to retire early. It is not without risk. Once made, you are basically locked into this choice. Modifying your payment schedule could trigger the 10% penalty, for violating the 59-1/2 rule, and a recapture tax.
Roth IRA accounts are different. You can withdraw your contributions (but not your earnings) at any time, without taxes or penalties and unlike traditional IRAs, Roth IRAs aren’t subject to RMDs during the owner’s lifetime.
After age 59-1/2, if the account has been open for at least 5 years, you can withdraw both contributions and earnings tax-free and penalty-free. However, if you withdraw your earnings before the age of 59-1/2 or before the account has been left open for 5 years, you may owe income taxes and a 10% penalty.
3. Age 62. You are eligible to collect Social Security. Should you?
This is the earliest age you can begin receiving a benefit, but only a reduced amount. Claiming Social Security before your full retirement age (FRA) will reduce your benefits by almost 30%, says the Social Security Administration.
Age isn't the only factor in determining when you should take Social Security. Your health, financial need, desire to leave work, current need for more money and concerns about solvency of the Social Security trust find are among the reason some may decide to take a reduced benefit at 62.
Benefits are reduced by 5/9 of 1% for each month before your FRA, up to 36 months. If the number of reduction months exceeds 36, then your benefit is further reduced 5/12 of one percent per month.
You can substantially boost your Social Security check by delaying collection of your benefits. You can also wait as late as age 70 to start collecting Social Security benefits and earn delayed retirement credits for every month after you wait after your FRA. You can increase your benefits anywhere from 24% to 32%, depending on your FRA, by waiting until 70 to collect benefits.
The Social Security website has a calculator you can use to estimate the impact of early and delayed retirement.
4. Age 65. You are eligible for Medicare
Be careful not to overlook your Medicare eligibility. If you decide to delay your benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. When you turn 65, your initial enrollment period lasts for seven months, beginning three months before you turn 65.
If you wait longer, your Part B Medicare medical insurance and Part D prescription drug coverage may cost you more money. Even if you can buy employer-provided insurance, you can enroll while working when you turn 65.
Automatic enrollment in Medicare. When you apply for retirement or disability benefits from Social Security (or the Railroad Retirement Board), it also serves as your application for Medicare. If you are approved for benefits, you’ll automatically get Part A coverage once you’re eligible for Medicare.
And if you’re getting benefits at least 4 months before you turn 65, you’ll automatically get Part A coverage and also be signed up for Part B. Because you pay a monthly premium for Part B coverage, you can choose whether to keep it or not.
When you have employer coverage at 65 and after. You can wait until you (or your spouse) stop working, or lose your health insurance, to sign up for Medicare Part B Medical Insurance, and you won’t pay a late enrollment penalty
Once you stop working, or lose your health insurance, you have an eight month Special Enrollment Period (SEP) when you can sign up for Medicare. The SEP starts when you stop working, or lose insurance, even if you choose COBRA or other coverage that’s not Medicare..
This SEP qualifies you to delay enrolling in Medicare Part B without having to wait for a General Enrollment Period (GEP) and paying the penalty for late enrollment.
For free, one-on-one help including: choosing a plan, reviewing coverage or understanding costs, contact your local State Health Insurance Assistance Program (SHIP) for free, unbiased assistance.
5. Age 66-67. You have reached your full retirement age (FRA) for Social Security
Your full retirement age is the age at which you become eligible for full benefits, without any reductions.
Your full retirement age depends on the year you were born.
- Born between 1943 and 1954, your FRA is 66
- Born in 1955, your FRA is 66 and two months
- Born in 1956 and 1959, your FRA is 66 and four months
- Born in 1957, your FRA is 66 and six months
- Born in 1958, your FRA is 66 and eight months
- Born in 1959, your FRA is 66 and ten months
- Born in 1960 or after, your FRA is 67.
6. Age 70. You are eligible to collect your maximum Social Security benefit
If you've waited until 70 to collect Social Security, you'll now collect the biggest monthly benefit possible. This amount is anywhere from 54% to 62% more than if you had started collecting your benefit at 62. How is that the case? Well, as discussed above, you'll lose almost 30% of your benefit if you collect at age 62. If you wait until age 70, you get any payments for delayed retirement credits that can increase a check by 24% to 32%, depending on your FRA.
7. Age 73. You must begin your required minimum distributions or face penalties
You've reached the peak of the retirement savings mountain and descending to the distribution phase. At age 73, you are bound to begin taking required minimum distributions (RMD) from your IRAs and employer retirement plans or face some hefty penalties.
The distributions will vary from year to year based on the value of the accounts and your age. Next you'll have to decide whether to invest, spend or donate the RMD income.
Bottom line
Important retirement decisions start well before you reach 65. By tracking your pre-retirement and retirement milestones, you can maximize your savings by taking advantage of catch-up contributions and avoid extra charges by applying for Medicare when you are eligible. Mark these seven important milestones on your calendar, so you remain aware of all of your opportunities and obligation as they arise.
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