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.
You can start taking penalty-free withdrawals from IRAs and qualified retirement plans as long as certain conditions are met. Ordinary income taxes generally apply to these distributions. (Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty.)
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.
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
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minimum distributions from most tax-deferred retirement plans or face a 50% penalty on the amount that should have been withdrawn.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.
Source: 1) Medicare & You 2014, U.S. Department of Health and Human Services
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