Important Dates for Investors


ReShelle Barrett, CFP®

Important Dates for Investors

Remember the excitement of turning 16 so you can get your driver’s license? And 21 to be a legal adult? Important birthdates don’t end there.   As you head toward retirement, consider the following dates as they may be critical in ensuring your financial plan’s success:

Age 55

Possible Penalty Free Withdrawals from Your 401(k)

 If you are age 55 or older and have separated from service (leave your job) you are eligible to take withdrawals from your 401(k) penalty free. Federal income tax will be due but no penalty. Keep in mind, the money must be in a 401(k) or other qualified employer plan at the time of the withdrawal. Since IRAs are not qualified plans, the monies cannot be rolled over prior to withdrawal. This applies to old employer 401(k)s as well.

Age 59 ½

Penalty Free Withdrawals from Retirement Accounts

 Although there are a few exceptions, the general rule for taking penalty free withdrawals from any retirement account starts at age 59 ½ . Again, they are subject to income tax to the extent they were pre-tax contributions. If the money is in a Roth IRA or Roth 401(k), withdrawals are both income tax free and penalty free.

Age 62

Early Social Security Benefits

If you have contributed to social security for at least 40 quarters, this is the earliest date you can begin retirement benefits. Starting at this age typically means your full retirement benefit will be reduced by approximately 25%. If you are still working, you may also be penalized for exceeding the current earned income limit ($17,040 in 2018). This applies to earned income only and goes away and when you reach your full retirement age. Your benefit may also be subject to income taxes as well. Always consult an advisor before deciding when to start receiving Social Security Retirement benefits. Visit for an estimate of your benefits.

Age 65

Medicare Eligible

 As health insurance costs continue to soar, this can be one of the most critical dates when planning for retirement. You will be automatically enrolled in Medicare parts A & B if you have already started collecting Social Security benefits. The premium for Medicare payments will come directly from your Social Security Income check and start at $134/mo. This amount may be higher depending on your total income.

Age 70 ½

Required Minimum Distributions from Retirement Accounts Begin

 This is the first year investors are required to start taking withdrawals from retirement accounts. Unlike turning 59 ½ at an exact date, this age applies to the year in which you turn 70 ½. If your birthday is after June 30th, yours will be the year you turn 71. The IRS gives a little extra time the first year (April 1st the following year) but then investors must take two distributions that second year. The premise is Uncle Sam lets you invest and grow your money in a retirement account without paying income taxes for many years. This is the year he requires you to start paying taxes on some of the money. The exact amount you must withdraw can be somewhat complicated to calculate (that’s a whole other article) but needs to be at least the minimum according to one of the IRS Life Expectancy Tables. One exception is if you are still working and participating in a 401(k), you are NOT required to take distributions until you separate from service.

ReShelle L. Barrett, CFP®

Contact ReShelle L. Barrett, CFP®

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107 Mt. Nebo Pointe
Suite 200
Pittsburgh, PA 15237
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Mt. Lebanon, PA 15228

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