Want to retire before 65? These milestones are critical.
Many people want to retire before the traditional retirement age of 65. With enough planning, diligence, and proper expectations, early retirement is possible. Knowing the importance of a few age-related milestones can help make achieving financial independence possible
Age 50
Beginning with the year they turn 50, retirement savers can make “catch-up contributions” to retirement accounts, IRAs, and Roth IRAs. In addition to the amounts all workers can contribute, a 50+ worker can contribute an additional $7,500 to their 401(k), 403(b), or governmental 457(b) plan. Those participating in a SIMPLE plan can contribute an additional $3,500, and contributors to traditional IRAs or Roth IRAs can add an additional $1,000. All these amounts are increased from time to time for inflation.
Fifty is also the age at which certain public safety employees can distribute funds from their retirement plans without incurring the 10% early distribution penalty normally applied when funds come out of a plan prior to age 59 ½. Eligible workers include federal law enforcement officers, customs and border protection officers, federal firefighters, and air traffic controllers. For everyone else, if all conditions are met, the penalty is waived at age 55 (see next section). This exemption applies only to distributions from the worker’s employer’s plan, not plans at former employers or IRAs.
Age 55
There are several exceptions to the penalty for taking funds from a retirement account before age 59 ½ but the one that is easiest to navigate is the “age 55 exception.” To qualify for the exception, you must separate from service in or after the year you turn 55. The penalty waiver only applies to distributions from the plan of the employer the worker left. It does not apply to other retirement plans or IRAs. While the penalty is waived, normal taxes must still be paid.
The year in which one turns 55 is also the year that those eligible to contribute to a Health Savings Account (HSA) can add an additional $1,000 to the account. HSA contributions are made pre-tax and distributions from the account are tax-free if used to pay eligible medical expenses.
Age 59 ½
This is the age that the 10% early distribution penalty disappears for all retirement accounts, IRAs and Roth IRAs. Unlike the provisions just described, the penalty is not waived during the year the taxpayer turns 59 1/2. The penalty is only waived after the precise date that the account owner turns 59 ½.
59 ½ is also the age at which most employer provided retirement plans offer “in-service distributions.” This allows a worker to continue working and contributing to the plan but also have access to the funds. This can be particularly handy when rolling over to an IRA may provide, among other things, better investment options, specific beneficiary designations, or more precise tax withholding choices than the employer plan. Funds not rolled over properly to an eligible account would be taxable but penalty free.
Age 60
The SECURE 2.0 Act of 2022 created a new “super catch-up” contribution. These larger catch-up contributions are only available to participants in 401(k)s, 403(b)s, or governmental 457(b) plans, not traditional IRAs or Roth IRAs. Beginning in the year a participant turns 60, they may make a catch-up contribution of up to $11,250 in 2025 instead of the $7,500 allowed for those over 50.
Age 62
This is the earliest one can begin receiving Social Security retirement benefits. However, starting before Full Retirement Age (67 if born in 1960 or later) results in a lower payment. The earlier one starts, the less they get. In addition, for all years prior to Full Retirement Age, dollars received are adjusted down further if the recipient works and makes enough to exceed an earnings threshold. In 2025, reductions from this “earnings test” start when wages reach $23,400.
Age 63
The year one turns 63 is the last year for the “super catch up.”
Age 64 and 9 months
This age starts the initial enrollment period for Medicare. The enrollment period lasts 7 months and includes the 3 months before your 65th birthday, the month you turn 65, and the 3 months after your 65th birthday. Generally, you should enroll at least in Part A even if you will stay on your or your spouse’s employer’s health coverage to avoid penalties.
According to a 2024 Mass Mutual study, the average retirement age is 62. This average includes the many who were forced out of the workforce due to things like health, family issues, and layoffs. These milestone ages may provide ways to get tax friendly access to retirement funds or draw some income prior to 65. For those whose goal is early retirement, these milestones may also provide a chance to ramp up their savings.
Making News…
We continue to help various media outlets provide sound information to their audiences. (Some links may require a subscription to view.) Dan Moisand,CFP® continues to write for Florida Today and MarketWatch, which are sometimes syndicated to other sites such as MSN & YahooFinance.
How does the One Big Beautiful Bill Act affect your charitable donations this year? – Florida Today
What’s the right time of year to take my RMD? – MSN
Can I put my RMD into my Roth IRA? – MarketWatch
When is the best time to do a Roth IRA conversion? – MarketWatch
Thinking of starting a business in retirement? There’s much at stake: Know the risks – Florida Today
Long-term care: What is it, how does it work and how can you plan to pay for it? – Florida Today
In the News…
Once again MFT Supports the development of the next generation of financial advisors: MFT is proud to continue sponsoring the University of Florida’s Wealth Management program at the Warrington School of Business. On November 13th, we sponsored a reception at the Citrus Club in Orlando where approximately 25 students, faculty and staff had the opportunity to connect with local financial planners and industry professionals. Prior to the reception, we hosted the group for a meet and greet with our team. Now nearing the end of its third year, the program has already attracted over 200 students, becoming a standout offering in Florida for future financial advisors.
If you are a member of an organization in need of a personal finance speaker, we are happy to talk with your group’s organizers about helping out at no cost.
Tommy Lucas, CFP®, EA and Dan Moisand,CFP® provided financial tips for assisted CNBC reporters on the following topics, a couple of which were syndicated to NBC affiliates:
Why year-end is popular timing for Roth conversions — and when to make an exception – CNBC
Year end is ‘absolutely a great time’ to review your finances, CFP says: Here’s what to do – CNBC
How much you can make in 2026 and still pay 0% capital gains – CNBC
How expiring ACA health insurance subsidies could impact Roth conversions – CNBC
Who benefits from 0% capital gains for 2025 under Trump’s ‘big beautiful bill’- CNBC
Notable
66% of U.S. baby boomers plan on cutting back on nonessential spending (McKinsey)
49% of early Social Security claimants cite fear that the program is running out of money (AARP)
$64,200 is the median annual cost for an assisted living facility in 2023 (Center for Retirement Research)
83% of working respondents who have a financial advisor are somewhat or very confident about their retirement (EBRI)