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have been withdrawn.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