We think of retirement as a single milestone — the day you finally exit the workforce for good. But when it comes to retirement benefits, there are actually six major milestones set by the federal government. You’re free to retire anytime, but understanding these important dates can help you choose the smartest time for you to retire financially.Just because you can withdraw money freely at 59 and a half doesn’t mean it’s a good idea. Leaving the money in your retirement account gives it more time to grow so it can help cover more of your retirement expenses in the future. Avoid touching your retirement savings until you feel pretty confident that you have enough to last for the rest of your life.
Taking Social Security at this age is a good middle ground if you’re not sure how long you’re going to live. You may not get as much per check as you would if you delayed benefits until 70 (see below), but you’ll probably get more than if you’d started benefits right away, at 62.
1. Age 59 and a half: The government stops penalizing your retirement distributionsRetirement distributions taken before 59 and a half are usually subject to a 10% early withdrawal penalty unless you meet certain criteria, like paying for a large medical bill, purchasing your first home, or taking Substantially Equal Periodic Payments (SEPPs). If you plan to retire before 59 and a half and want to avoid a 10% penalty, you’ll have to rely on money in your savings account or taxable brokerage account until your retirement distributions are no longer subject to penalties.
2. Age 62: You become eligible for Social SecurityYou may sign up for Social Security once you turn 62, and many people choose to begin claiming their benefits at this age. But you should know that starting this early could cost you money over the long run. Every month you claim benefits before your full retirement age (FRA) — more on that below — reduces your benefit checks. You’ll only get 70% of your scheduled benefit per check if you begin benefits at 62 and your FRA is 67, or 75% if your FRA is 66. It could still make sense to start Social Security at 62 if you don’t expect to live a long life or if you need this supplementary income to help you cover your living expenses. But if you’re trying to maximize your benefits, and you expect to live into your mid-80s or beyond, you’ll probably get more money by delaying benefits.
3. Age 65: You become eligible for MedicareYou become eligible for Medicare once you turn 65. This helps cover some of your medical expenses in retirement, but it won’t cover everything. You’ll still have deductibles, copays, and premiums, and it doesn’t cover some expenses, like hearing aids, at all. You can purchase a Medicare supplement insurance policy to help fill in some of these gaps, but the premiums are another monthly payment. If you’re eligible for a health savings account (HSA), saving in one can help you cover your medical costs in retirement, but you can no longer contribute to an HSA once you enroll in Medicare. Those who are still working and have good health insurance through their employer may consider delaying Medicare until they retire so they can continue to put money away in their HSAs. You are still free to use the funds that are in your HSA at any point after 65.
4. Age 66 or 67: You reach your full retirement ageYour FRA is the age at which you become eligible for your full Social Security benefit based on your work record. Everyone’s FRA was 65 for a long time, but that number climbed as people began living longer, and it now sits between 66 and 67, depending on your birth year. Here’s a chart to help you find yours:
|Birth Year||Full Retirement Age|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 and later||67|