A Retirement Timeline

The aging milestones for young people are well known: At age 16 you can drive and 18-year-olds can vote. But the rights and privileges of aging don’t end after your first legitimate drink in a bar on your 21st birthday. There are variety of retirement rights of passage you should take advantage of at different ages. Here’s a retirement timeline.

Age 49 and under. Workers with traditional 401(k) plans can contribute up to $16,500 in 2009. Try to max out your employer’s match.

Age 50. Some employers offer their workers age 50 and older the opportunity to make catch-up contributions. These employees can sock away an extra $5,500 in their 401(k) in 2009 and that amount may further increase in future years.

Age 55. If you leave your job after age 55, you can begin taking penalty-free 401(k) withdrawals at this age. Withdrawals from traditional 401(k)s will be taxed as income.

Age 59 ½. IRA withdrawals are allowed without penalty and are taxed as income.

Age 62. Social Security eligibility begins, but your checks will be reduced by 25 to 35 percent if you begin claiming at this age. If you plan to continue to work, benefits are also reduced by 50 cents for each dollar your earn above $14,160 in 2009.

Age 65. Medicare eligibility kicks in. Beneficiaries may sign up for Medicare Part B during a 7 month window around their 65th birthday that begins 3 months before the month you turn 65 and ends three months after. It’s a good idea to sign up right away because your Medicare Part B monthly premium increases 10 percent for each 12-month period you were eligible for Medicare Part B, but did not enroll. If you or a spouse are still employed and covered by a group health plan after age 65, you have 8 months to sign up after you leave the job before the penalty kicks in.

Age 66. This is the year baby boomers born between 1943 and 1954 are eligible to receive full Social Security retirement benefits. For those born between 1955 and 1959 the full retirement age gradually increases from age 66 and 2 months to 66 and 10 months. The month you reach your full retirement age, your benefit checks are also no longer reduced if you continue to earn income from work.

Age 67. For those born in 1960 and later, the age you can receive full Social Security retirement benefits is 67.

Age 70. Your Social Security benefits further increase by 7 to 8 percent for each year you delay claiming up until age 70. After this year there is no additional incentive to put off collecting your due.

Age 70 ½. Normally, those age 70½ or older must take annual required minimum distributions from retirement accounts that are taxed as income. But in 2009 only, withdrawals can be skipped without penalty. In future years, the amount of the distribution is likely to be calculated by dividing the balance of your IRA and 401(k) accounts by your life expectancy as determined by the Internal Revenue Service. Seniors who fail to withdraw the correct amount must pay a 50 percent tax penalty and income tax on the amount that should have been withdrawn.