Retirement Planning Timeline

Rick Welch |

Planning for retirement requires you to make assumptions about your life and the world around you. Your path to retirement is a personal one with twists and turns that are unique to you and your circumstances. Use this timeline of key milestones to gain a clearer understanding of what tasks need to be done when as you prepare for the happy, healthy and prosperous retirement you so deserve. Try not to focus just on the challenges of retirement, rather think of all the new opportunities that await.

Today – What are you waiting for? It is never too late to start planning for your retirement. Like anything in life, the more planning you do the better your chances of having a good outcome. Starting at least 10 years before your expected retirement is a good idea, though starting earlier is always better. Most studies suggest that the keys to retirement savings accumulation are (1) starting as early as age 25, (2) saving about 15% of your annual income, (3) investing in a growth-oriented portfolio and (4) retiring at age 67 or older.

Ages 40 to 50 – Make the maximum elective deferral ($22,500) to your employer sponsored plan. If over age 50, make a catch-up contribution of an additional $7,500.  Put extra savings into an IRA or Roth IRA, both of which have a maximum annual contribution limit of $6,500 and allow for a catch-up contribution (over age 50) of another $1,000.

Age 60 – Roll over and consolidate old plans.  Many 401(k) plans limit participants to a list of average performing mutual funds with high expenses and prohibit the purchase of individual stocks or low cost exchange traded funds (ETFs). With an IRA you will have a wider range of investment options available to you and will be able to construct a portfolio that better matches your vision and market expectations.  Consolidating old employer-sponsored plans and IRAs will lower management fees along the way and allow all retirement assets to be managed under one asset allocation plan.

Age 62 – If you are already retired and making withdrawals from retirement savings, it might be a good idea to consider claiming your social security benefits early at age 62. But beware there is a catch as your monthly benefit (taken early at age 62) will be reduced by about 30%.  On the other hand, if you claim early and continue to work you will be subject to a benefit reduction of $1 for every $2 you earn above $21,240.

Age 65 – When you are within three months of your 65th birthday you are eligible to sign up for Medicare.

Ages 66 to 67 – At present, full retirement age for social security benefits ranges from 66 plus a certain number of months (if born between 1955 and 1959) to 67 (if born in 1960 or later).  You may decide to delay your benefits until age 70. Delayed retirement credits are earned at the rate of 2/3% (or 8% per year) of your primary insurance amount for each month that your benefit is not claimed.

Age 72 – A required minimum distribution (RMD) is the amount (about 4%) that IRA owners and qualified retirement plan participants (current employees may delay RMDs while still working for the employer which sponsors the plan) must begin withdrawing from their retirement accounts by April 1st following the year in which they reach age 72.  Forgetting to make the required withdrawal is an expensive mistake with a penalty of up to 50% of the amount that should have been withdrawn.