Significant Ages for Retirement Plan Participants

Retirement planning involves various stages and decisions, many of which are influenced by your age. Knowing these key age-related milestones can help you optimize your retirement savings strategy, comply with legal requirements, and make informed decisions about your financial future. Listed below are some significant ages that may impact your retirement plan. 

Age 21: Joining a Plan

At age 21, employees can no longer be excluded from participating in employer-sponsored retirement plans, provided they have met the necessary service requirements. This means that once an employee turns 21 and has met other eligibility requirements, they must be allowed to join the retirement plan.

Age 50: Making Catch-Up Contributions

In the year that an employee turns 50, they unlock the ability to make catch-up contributions to certain retirement accounts. Catch-up contributions allow participating employees over the age of 50 to contribute extra funds beyond the standard limit, helping them boost their savings as they approach retirement age.

Age 55: Early Distribution Without Penalty

If an employee separates from service and takes a distribution from a qualified retirement plan at age 55 or older, they are not subject to the 10% early withdrawal penalty.

Age 59½: No Penalty for Distributions

Once an individual reaches 59½, they can take distributions from their qualified retirement plans, including IRAs, without incurring the 10% early withdrawal tax. This applies to all individuals, whether they are still working or not.

Age 70½: Required Minimum Distributions (RMDs)

For individuals who reached age 70½ before January 1, 2020, Required Minimum Distributions must generally begin by April 1 of the year following turning 70 ½. However, if you are not a 5% owner of the business and are still working, some plans allow you to delay RMDs until after you retire.

Age 72: Updated RMD Rules

The SECURE Act changed the starting age for RMDs to 72 for those reaching 70½ in 2020 or later. For these individuals, they must take their first RMD by April 1 of the year following the year they turn 72. 

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