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Financially Significant Birthdays

Every birthday is a gift. And some birthdays are bigger than others. Don’t I know it! Someone said my 30th, my 40th and just recently my 50th were big ones. And they were for a variety of reasons; then again it’s getting harder to remember why!

With the best intentions in mind, I’d like to review four of what I call “financially significant” birthdays with you, especially now that they are closer for me than ever before.


Not only do you qualify for AARP, you also qualify to take advantage of what’s called a retirement savings “Catch-Up Contribution.” Thanks to the Pension Protection Act of 2006 you are now eligible to contribute to a retirement account in two ways:

  1. Age 50 catch-ups

If you are age 50 or older by the end of the year, your individual contribution limit to a retirement savings account, such as a 401(k) or 403(b) plan, is increased by $6,000 in 2015 and 2016 (the catch-up contribution amount). This means your individual limit increases from $18,000 to $24,000 in 2015 and 2016 even if neither plan allows age-50 catch-up contributions (IRC Section 414(v) and Treas. Regs. 1.402(g)-2).

2. Elective deferral limit

The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan’s terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans.1

59 ½

Yes, I know, not technically a birthday but important if you have a traditional IRA because you can take distributions out for the first time without any penalties. Generally, IRA owners must wait until they are 59 1/2 to withdraw IRA funds without penalty (the 10% early distribution penalty). The age 59 1/2 rule is based on the IRA owner’s actual age and not the year in which a client turns 59 ½.2 You don’t have to, but you can.

This is also a special birthday if you have a Roth IRA, and distributions are not only penalty free, but also free from federal income taxes, as long as the Roth IRA has been in place for at least five years. There are some other exceptions that can be found here.


Social Security is a wonderful thing. But there are important decisions that need to be made along the way. One of them is to declare at age 62 if you want to begin receiving payments. Age 62 is the soonest you can begin receiving retirement payments, but the payments will be discounted from the income you would receive if you waited until your Full Retirement Age (FRA).  Depending on the year you were born, your FRA will be somewhere between age 65 and 67. Keep in mind, the longer you wait, the more you will receive. Each year you wait until age 70 adds 7 to 8 percent to your monthly benefit.3 That being said, you have to decide if 62 is the right time for you.

70 ½

Hopefully, you started contributing to a qualified plan some time ago. Just like you can’t stop time, you must also begin to receive distributions from your qualified retirement plans or risk significant penalties.

As with all financial decisions, some are easy to make some are not, if you’d like some help, let us know.

So, as you get ready to celebrate these milestone birthdays, remember to take a deep breath. Try to remember a wish you have not already made yet and blow out all those candles!




Distributions from qualified plans and traditional IRAs are taxed as ordinary income and, if taken prior to reaching age 59½ may be subject to an additional 10% federal income tax penalty.