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Must-Know Retirement Deadlines ?

When can you access your savings without a penalty? When should you enroll in Medicare? At what age is it best to collect Social Security??

In the years leading up to retirement, there are a number of key milestones and deadlines to consider. Without careful attention, it’s easy to miss these checkpoints and the consequences can be severe. Let’s delve into eight crucial moments to help you stay on track.

Age 50: Time to Play Catch-Up

Once you turn 50, the IRS may permit you to make yearly “catch-up contributions.” These are additional amounts you can contribute to your 401(k)s and IRAs beyond the standard annual limits. This option is designed to help you save more for retirement. Unfortunately, not enough pre-retirees take advantage of this.?

In 2023, you’re allowed to contribute $22,500 into a 401(k) and $15,500 into a SIMPLE 401(k). With the catch-up option, you can add an additional $7,500 to the 401(k) and $3,500 to the SIMPLE 401(k)1.

Age 55: Know the Rule of 55

Typically, making an early withdrawal from a workplace retirement plan can result in a penalty. But there are exceptions to this rule, and the rule of 55 is one such example.

If you turn 55 during the calendar year you lose or leave your job, you may be eligible to begin taking distributions from your 401(k) without paying a penalty. However, you must still pay taxes on your withdrawals2.

Age 59 ?: Say Goodbye to the Early Withdrawal Penalty

Remember when you used to celebrate your half-birthday? While those days are likely behind you, turning 59? might be a milestone worth acknowledging.?

The reason? After turning 59?, you can generally take out money from employer-sponsored retirement plans and IRAs without the 10% early withdrawal penalty. However, regular income tax may still apply to these withdrawals. There are some exceptions to this rule, so make sure to discuss your situation with your tax advisor3.

Age 62: You’re Eligible to Start Claiming Social Security?

At 62, you’re eligible to start receiving Social Security. But if you opt for benefits before reaching your full retirement age (the age where you can claim 100% of your benefits), your monthly amount can be permanently reduced. It’s advisable to consult with a financial professional to determine the best age for you to begin collecting Social Security benefits.

Age 65: It’s Time for Medicare Enrollment?

At this age, the majority of Americans qualify for Medicare, which covers a significant portion of doctor visits, hospital care, and other medical services. However, Medicare is divided into various parts – A, B, C, and D. Navigating the enrollment and benefits for each part can be intricate, so consider seeking professional guidance.?

Age 66-67: Full Retirement Age

You can start receiving your Social Security retirement benefits as early as age 62. However, full retirement age (FRA) is the date when you can receive the full standard benefit amount. This number depends on the year you were born.4

If you were born between 1943 and 1954, your full retirement age is 66. If you were born between 1955 and 1959, your full retirement age is 66 plus two months for each year after 1954. Still confused? Visit the?Social Security Administration’s website?for more information.

Age 70: Maximum Social Security Benefit?Unlocked

By postponing the start of your Social Security benefits beyond your FRA and up to age 70, you accumulate delayed retirement credits. These credits boost your monthly benefit amount. So, if you hold off until age 70, you’ll obtain the highest possible monthly benefit. After age 70, there’s no financial advantage to delaying your claim any longer.

Age 73: Begin Required Minimum Distributions (RMDs)

One of the big reasons people contribute to 401(k)s during their working years is to lessen their tax burden. However, you’re not allowed to keep your savings growing tax-free indefinitely. The government eventually wants to tax it. You need to start making taxable withdrawals from your account by April 1 of the year following the age set for required minimum distributions (RMDs). Failing to do so could result in a penalty of up to 25% of the amount you should have withdrawn.5

Navigating the path to retirement isn’t just about marking off the years; it’s about recognizing and preparing for significant moments along the way. If you know anyone between the ages of 50 and 73, consider sharing this information with them; it might be just the guidance they need.

Disclosure: This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

Sources:

1??“Retirement Topics – Catch-Up Contributions.” IRS, 29 Aug. 2023, www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions. Accessed 5 Sept. 2023.

2?“Topic No. 558, Additional Tax on Early Distributions From Retirement Plans Other Than IRAs.” IRS, 6 Aug. 2023, www.irs.gov/taxtopics/tc558. Accessed 5 Sept. 2023.

3?“Retirement Topics – Exceptions to Tax on Early Distributions.” IRS, 29 Aug. 2023, www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions. Accessed 5 Sept. 2023.

4?“Starting Your Retirement Benefits Early.” Social Security Administration, 16 Jun. 2020, www.ssa.gov/benefits/retirement/planner/agereduction.html. Accessed 5 Sept. 2023.

5?“Retirement Plan and IRA Required Minimum Distributions FAQs.” IRS, 14 Mar. 2023, irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs. Accessed 5 Sept. 2023.

Protect Yourself From AI Fraud

As you navigate the digital landscape, it is important to be aware of the evolving fraud risks posed by Artificial Intelligence (AI). Scammers embrace AI because it enables them to analyze large amounts of data quickly, identify potential targets more efficiently, and personalize their scams to appear genuine, increasing the chances of success.?

By equipping yourself with the right knowledge and skills, you can mitigate many of these risks. Much of this comes down to staying informed about the latest scams and fraud tactics. By doing this, you’re improving your ability to detect potential risks before they ensnare you in their deceptive web. Here are a few of the most popular:?

Phishing Scams

Phishing scams are a time-tested strategy and have only gotten better through AI. Scammers use AI to craft convincing emails or messages impersonating reputable organizations.1?For example, you might receive an email that appears to be from your bank, asking you to update your account details by clicking on a link. The look and feel of the site may be spot-on, but it’s not your bank, it’s an imposter looking to gain your login credentials.?

Imposter Scams

Imposter scams involve fraudsters posing as trusted individuals or organizations, such as government agencies or utility companies.2?AI technology enables scammers to mimic voices and manipulate victims into believing their authenticity. For example, you may receive a call from someone claiming to be from the IRS, pressuring you to provide personal information or make immediate payments. It might sound legitimate, but the IRS will never call you for an immediate payment.

Tech Support Scams

Tech support scams pretend to offer assistance with computer issues. Scammers may use pop-ups or phone calls to convince individuals to provide access to their devices or pay for unnecessary services.3?For example, you may encounter a pop-up claiming your computer is infected and urging you to call a toll-free number for immediate assistance. Once again, this is a scam trying to separate you and your hard-earned money.

Grandparent Scams

Grandparent scams exploit emotions by pretending to be a grandchild in distress, often requesting money urgently.4?AI technology enables scammers to research and personalize their approach, making the scam more convincing. For example, you might receive a phone call from someone claiming to be your grandson, asking for money to bail him out of jail. Rest assured, your grandson is probably not in jail, this is a scam and you should hang up.

Deepfake Scams

Deepfake technology, fueled by AI, is a growing concern in the realm of fraud. Scammers can use AI algorithms to manipulate videos or images, creating realistic yet fraudulent content that appears to feature well-known individuals. This can be leveraged for various scams, such as impersonating celebrities or public figures to deceive individuals into believing false narratives or engaging in financial transactions. For example, you might see a video featuring a famous person encouraging you to invest in an exciting new opportunity. It might look real, but it’s computer-generated.?

Malware Attacks

AI-powered malware attacks have become more sophisticated, making it harder to detect and prevent them. Scammers leverage AI to create intelligent malware that can evade traditional security measures and exploit vulnerabilities in computer systems or networks. For example, you might download a seemingly innocent file, but behind the scenes, the malware is infiltrating your computer.5

Protecting oneself from AI-driven fraud requires a combination of awareness, caution, and education. Be cautious of unsolicited requests for personal information, immediate payments, or access to your devices, whether it’s an email, phone call, or pop-up.?

Independently verify the identity of individuals or organizations contacting you. Don’t rely solely on the information provided by the caller or the content of an email. Use official contact information from trusted sources to reach out and confirm the authenticity of the communication.

By staying informed about the latest scams, recognizing the signs of AI-driven fraud, and implementing the tips provided by reputable sources, you can safeguard your financial well-being in the digital age.?

Sources:

1?AARP. “Phishing.”?Aarp.Org, 2 Sept. 2021, www.aarp.org/money/scams-fraud/info-2019/phishing.html. Accessed 14 Jul. 2023.

2??Federal Trade Commission: Consumer Advice. “Imposter Scams.”?Consumer.Ftc.Gov, 18 May 2016, consumer.ftc.gov/features/imposter-scams. Accessed 14 Jul. 2023.

3?Waterman, Genevieve. “The Top 5 Financial Scams Targeting Older Adults.”?National Council on Aging, 27 Jul. 2022, www.ncoa.org/article/top-5-financial-scams-targeting-older-adults. Accessed 14 Jul. 2023.

4?Waterman, Genevieve. “The Top 5 Financial Scams Targeting Older Adults.”?National Council on Aging, 27 Jul. 2022, www.ncoa.org/article/top-5-financial-scams-targeting-older-adults. Accessed 14 Jul. 2023.

5?AARP. “Tech Support Scams.”?Aarp.Org, 1 Apr. 2022, www.aarp.org/money/scams-fraud/info-2019/tech-support.html. Accessed 14 Jul. 2023.

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Copyright ? 2023 The Wealth Transition Collective, All rights reserved.

Our mailing address is: 1632 Northampton Street Holyoke, MA 01040

Securities and Advisory Services offered through Commonwealth Securities and advisory services offered through Commonwealth Financial Network?, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.