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8 Retirement Milestones That Affect Your Investment Decisions

Kelly Campbell

Maximize your benefits.

Change your investment philosophy to "winning by not losing." You will never be hurt by having a positive return, but you can be significantly affected by a negative return, especially after you retire. Many people focus on their portfolio's rate of return, but age is also an important factor that will allow you to maximize certain benefits. Mark your calendar for these important retirement milestones that can affect your investment decisions.

Age 50

Once you reach age 50, you're eligible to take advantage of the "catch up" provision, meaning you can make greater contributions to your qualified retirement accounts, including individual retirement accounts, Roth IRAs and 401(k)s. You're now able to increase your IRA contribution from $5,500 to $6,500 annually, and you can also add an extra $5,500 to your 401(k), increasing the contribution limit from $17,500 to $23,000 annually.

Age 55

With the stock market at an all-time high, it may correct by 20 to 40 percent. And if interest rates start to rise and then the stock market corrects, retirees may need to go to work. With that in mind, age 55 is a good time to rethink or redo your retirement planning. If you are not comfortable doing this yourself, find a good wealth manager who specializes in working with boomers and retirement issues.

Age 59 1/2

Once you reach age 59 1/2, you can avoid the 10 percent early withdrawal penalty on traditional 401(k) and IRA account distributions should an unplanned event or illness occur. However, income tax will still be assessed on the withdrawals. Meanwhile, withdrawals from Roth-optioned accounts are tax-free if held in the account for more than five years.

Age 62

This is the earliest age you are eligible to file for Social Security benefits, but there is a catch. If you file for Social Security as soon as you turn 62, you will only be eligible to receive 70 percent of your total benefit. Also, should you decide to file and continue to work, your benefits could be partially or entirely withheld and taxed. However, if you wait and file at your full retirement age, you will receive the full retirement benefit.

Age 65

Now you can enroll in Medicare. You no longer have to rely on employer-sponsored or private health insurance plans. Remember that filing for Social Security does not automatically include enrollment in the Medicare program. You need to register for Medicare benefits during a seven-month window, including the three months before your 65th birthday, to avoid paying higher premiums for coverage.

Ages 66 and 67

For the majority of baby boomers, the full retirement age is 66. If you were born after 1960, 67 is the full retirement age, at which point you're eligible to receive your full retirement benefit. If that is the case for you, and you decide to claim benefits at age 65, you will receive about 87 percent of your total benefit.

Age 70

For every year you delay drawing your Social Security benefit, you receive a "delayed retirement credit," an 8 percent annual increase to your accumulated Social Security benefits. If you decide to work a few more years and not file for Social Security, you can receive that 8 percent increase until age 70. After 70, there isn't any advantage if you delay filing for benefits.

Age 70 1/2

Once you reach age 70 1/2, you must take required minimum distributions from your traditional retirement accounts or you will pay a 50 percent tax penalty on the amount that should have been withdrawn. That's a pretty substantial fine from the Internal Revenue Service. Scheduling and taking required minimum distributions is one of the most important things retirees must remember to do.

Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment advisor in Alexandria, Va. Campbell is also the author of "Fire Your Broker," a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisors abandoned their responsibilities to help them weather the storm.



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