Most children stop being "and-a-half" somewhere around age 12. Kids add "and-a-half" to make sure everyone knows they're closer to the next age than the last.
When you are older, "and-a-half" birthdays start making a comeback. In fact, starting at age 50, several birthdays and a "half birthday" are critical to understand because they have implications regarding your retirement income.
At age 50, workers in certain qualified retirement plans are able to begin making annual catch-up contributions in addition to their normal contributions. Those who participate in 401(k), 403(b), and 457 plans can contribute an additional $7,500 per year for 2023 (up from $6,500 in 2022).1
Those who participate in Simple IRA or Simple 401(k) plans can make a catch-up contribution of up to $3,500 for 2023 (up from $3,000 in 2022). And those who participate in traditional IRAs can set aside an additional $1,000 a year.2
At age 59 1/2, workers are able to start making withdrawals from qualified retirement plans without incurring a 10% federal income tax penalty. This applies to workers who have contributed to IRAs and employer-sponsored plans, such as 401(k), 403(b), and 457 plans.
Keep in mind that distributions from traditional IRAs, 401(k) plans, and other employer-sponsored retirement plans are taxed as ordinary income.
At age 62 workers are first able to draw Social Security retirement benefits. However, if a person continues to work, those benefits will be reduced. The Social Security Administration will deduct $1 in benefits for each $2 an individual earns above an annual limit. In 2023, the income limit is $21,240 (up from $19,560 in 2022).
Note: The SECURE 2.0 Act will increase the 401(k) plan catch-up contribution limits to the greater of $10,000 or 150% of the regular catch-up amount for individuals aged 60 through 63. The increased amount will be indexed for inflation after 2025. The provision will take effect for taxable years beginning after December 31, 2024. (There will also be increased catch-up amounts for SIMPLE plans.)
At age 65, individuals can qualify for Medicare. The Social Security Administration recommends applying three months before reaching age 65. It's important to note that if you are already receiving Social Security benefits, you will automatically be enrolled in Medicare Part A (hospitalization) and Part B (medical insurance) without an additional application.3
Between ages 65 and 67, individuals become eligible to receive 100% of their Social Security benefit. The age varies, depending on birth year. Individuals born in 1955, for example, become eligible to receive 100% of their benefits when they reach age 66 years and 2 months. Those born in 1960 or later need to reach age 67 before they'll become eligible to receive full benefits.
Under the SECURE 2.0 Act, the required age used to determine distributions increases from age 72 to 73 starting on January 1, 2023. It will then increase to age 75 starting on January 1, 2033.
Understanding key birthdays may help you better prepare for certain retirement income and benefits. But perhaps more importantly, knowing key birthdays can help you avoid penalties that may be imposed if you miss the date.
1 The catch-up limit is currently adjusted in $500 increments.
Thanks to the Secure 2.0 law, the limit on catch-up contributions to 401(k) plans will rise to the greater of $10,000 or 150% of the regular catch-up amount for individuals ages 60 through 63, indexed for inflation. This provision will take effect for taxable years beginning after December 31, 2024.
2 If you reach the age of 50 before the end of the calendar year.
3Individuals can decline Part B coverage because it requires an additional premium payment.
In 2023, the average monthly Social Security benefit for a retired worker is about $1,827 (up from $1,657 in 2022).
Source: Social Security Administration
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