Age-Related Retirement Rules That Every Retiree Should Know

Different retirement rules apply at different ages.

Family members ranging in age from 40 to 70.
Knowing the age-related rules helps you make the most of your retirement money.. Sollina Images / Getty Images

Certain retirement planning events are triggered at specific ages, such as when you can begin drawing on Social Security, or when you are required to take IRA distributions.

Other retirement planning events are not age-triggered... but perhaps they should be. Below is your guide to planning by retirement age - a list of what happens, what rules kick-in, and what you need to be thinking about as you reach various retirement ages.

AGE 55

Age 55? It's time to get serious about your retirement planning. You'll want to start putting together projections that show you where your retirement income will come from. This retirement income plan is best laid out in a timeline format so you can see year-by-year when pensions or Social Security will begin.

If you're going for an early retirement, make sure you budget for the cost of health insurance - it can be expensive until age 65, when Medicare begins. And if you need cash now, at age 55, you may be able to access your 401(k) money penalty-free - if you retired after reaching your 55th birthday. 

In addition, rather than looking for the best investments, you should begin thinking about strategies that help you maximize your lifetime income. For example start shifting a portion of your portfolio into a bond ladder, so that CDs or bonds are lined up to mature and match up with your future retirement age.

AGE 59 ½

59 ½ is the first age at which you can take withdrawals from your IRA and other retirement accounts without incurring a penalty tax. Some families may benefit from taking withdrawals at this age and delaying the start of their Social Security until age 70. Retirement account withdrawals will show up on your tax return, so now is a good time to begin to look into how your retirement income will be taxed.

You'll also want to look into the costs and benefits of long-term care insurance to cover health care costs in later life that won't be covered by Medicare or Medicare Supplement policies.

If you are within five years of your desired retirement age, start building up cash reserves, get more conservative with your investments, and consider meeting with a retirement planner who can help you see if you are on track to have enough to retire in the next few years.

AGE 62

This is the age when you can begin receiving Social Security benefits. You will receive a larger Social Security benefit if you wait until about age 66 to apply for benefits, and an even larger benefit if you wait until age 70 to start collecting. Before making such important planning decisions, be sure to read up on Social Security rules, such as the earnings limit, which can reduce your benefit amount if you take Social Security early and continue to work.

In addition to learning more about Social Security, you'll want to look at changes in your insurance needs and make sure you have your basic estate planning documents in order.

AGE 65

Age 65 is when Medicare begins. Most U.S. folks should enroll in Medicare a few months prior to your 65th birthday - even if you have employer or retiree health coverage. Part of your Medicare coverage is free if you have enough years of work in the U.S. However, your Medicare Part B is not free. You will pay a premium based on your MAGI (Modified Adjusted Gross Income) from your tax return two year's prior. If your current income is much lower than your income two years ago you can request a decrease in your Medicare Part B premium.

AGE 70

As you reach 70 and beyond, strategies such as reverse mortgages and immediate annuities become more attractive. Such strategies may allow you to increase your income without taking on market risk.

For most couples, delaying the start of the highest earner's Social Security until they reach age 70 is going to make a lot of sense - but there is absolutely no benefit to waiting until past age 70 to start benefits.

AGE 70 ½

Once you reach age 70 ½ you are required to take distributions from your IRAs and/or other qualified retirement accounts like 401(k) plans. These mandatory distributions are called required minimum distributions. These distributions can be made in cash, or you can distribute shares of investments. The total dollar amount that is distributed will be included as taxable income on your tax return. You can have taxes withheld directly from the distribution. This is often a good idea so you don't come up short on funds when you file your tax return.

AGE 75+

Every few years it is important to review the plans you have put in place. Periodic reviews allow you to catch small problems before they become large problems. You'll also want to give some thought to, and begin discussing, end of life decisions with your spouse and immediate family. it may be tough to start these conversations, but including family in your planning is the responsible thing to do, and it makes life easier for all those involved.

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