Retirement Planning: Critical Ages

Retirement PlanningIt is a personal decision to decide when to retire but there are some age-based considerations that will help to guide federal and postal employees when planning and making retirement decisions. Retirement planning can never take place too far in advance.

The rule of 5 is important in the Federal Service (FEHB for instance).  Generally speaking, if you have worked for at least 5 years you may be entitled to a number of benefits.

In addition, the chart below illustrates some important age-based considerations for your retirement planning.

Age 50

• Begin age-based catch-up to defined contribution plans and individual retirement accounts (IRA).  Beginning with the year you reach age 50, federal law allows for the deferment of a certain dollar amount per year to a qualified defined retirement plan.  The catch-up amount is $5,000, indexed in $500 increments.  The age-based catch-up amount for IRA contributions is $1,000.

Age 55

• After separation from service, you may begin withdrawing from a qualified plan without paying a 10 percent penalty.

Age 59.5

• You may begin withdrawing from qualified retirement plans, if retired or from an IRA without incurring the 10 percent penalty.

Age 62

• You can begin receiving your Social Security benefits; however, the amount may be reduced by as much as 30 percent, depending on the date of your birth.

Age 63.5

• The Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) law makes health insurance in most employers’ group health plans available for at least 18 months after separation; however, you bear the full cost, including the portion previously paid by your employer (plus a small administrative fee).  Upon reaching age 65 and you enroll in Medicare Part B, federal law requires access to Medigap health insurance at standard rates.  Combining COBRA and Medigap effectively ensures access to health insurance beginning at age 63.5.

Age 65 – 67

• Depending on your date of birth, you may begin receiving unreduced Social Security benefits without being impacted by earnings limits.

Age 65

• You may enroll in Medicare, if eligible, and by keeping your FEHB coverage, you will have sufficient coverage in retirement.  Medicare pays about 80% of coverage and your FEHB will make-up for any outstanding portions for services covered.   When you reach Medicare eligibility, Medicare becomes the primary in most cases, while your FEHB acts as a supplement.   Note there are some services that Medicare covers and FEHB does not, the reverse is also true.

Age 70

• You may begin maximum Social Security benefits, if the starting date was delayed to this age.  There is no advantage to delaying benefits past this age.

Age 70.5

• Required minimum distributions from qualified plans like your TSP, IRAs, and deferred compensation plans begin the year after you turn 70.5.

There have been many changes in health care laws; therefore it is always recommended that you review your policies and plans often.  You should also find a good, highly trained, financial professional to help you with your retirement plan and benefit and insurance selections.

FEGLI information

FEHB and Postal LiteBlue Access

TSP Account Access

P. S. Always Remember to Share What You Know.

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