Your investments are likely held across a variety of accounts. The order in which you withdraw from your retirement accounts can significantly impact the longevity of your savings. In retirement, you may want to consider selling from taxable accounts first, tax-deferred accounts next, and tax-free accounts last. This allows tax-advantaged accounts to stay invested longer.
You are eligible for full Social Security benefits at your “full retirement age,” which is determined by the year of your birth. You may delay your withdrawal date to increase your monthly benefit. The maximum benefit levels are available at age 70.
You are required to begin taking RMDs from most tax-deferred accounts by April 1 of the calendar year following the year you turn age 70½. If you do not take the RMD, you’ll incur a 50% tax penalty on the amount that should have been taken.
You’ll want to ensure your assets will be distributed according to your wishes upon your death. In addition, now may be a good time to consider how estate taxes could impact your assets. If you’re certain you will not need all of your invested funds in retirement, gifting can help reduce the size of your taxable estate. In 2008, you can give up to $12,000 each to an unlimited number of account beneficiaries without gift tax consequences.
Each birthday brings new opportunities and new responsibilities.
| Ages and Options Time Line | |
| When you're age | |
| Any | You may be required to pay quarterly estimated taxes on income you receive if withholding has not been taken out by an employer or other payer. This includes income from pensions and some retirement plans. (If your finances are complex or if you are unsure about what to do, consult a tax advisor.) |
| 55 | If you're retired, you may begin taking payments from these retirement plans: 401(k), 403(b), money purchase pension, profit sharing. (No early withdrawal tax penalty!) |
| 59½ | Whether you're retired or not, you may begin taking payments from these retirement plans without penalty: Traditional IRA, Rollover IRA, SEP-IRA. |
| 62 | If you're retired, you may begin receiving reduced Social Security benefits. |
| 65, 66, or 67 | Depending on your birth year, you may begin receiving full Social Security benefits. Retired or not, you may be eligible for Medicare. |
| 70½ | In most circumstances, you must begin taking required minimum distributions (RMDs) from retirement plans (IRA, SEP-IRA, profit sharing, money purchase pension, 401(k), 403(b)) by April 1 of the year following the year you turn 70½. (Penalties if distributions are not timely!) |
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