Age 50
You are eligible to join the American Association of Retired Persons (AARP).
The AARP is a nonprofit, nonpartisan membership organization for people age 50 and over. AARP provides a wide range of benefits, products and services for its members. Membership includes access to discounts on travel, online services, computers, music and publications like AARP The Magazine. There are also 3,200 local chapters, driver safety courses, tax prep help and a nationwide volunteer network. You can learn more about the AARP by visiting their website at www.aarp.org.
Catch-up contributions available up to $5,000.
Catch-up contributions allow employees age 50 or older to contribute an extra $5,000 per year to the Deferred Compensation Plan over the IRS annual maximum, which is $15,000 for 2006. This feature allows people to maximize their retirement savings as they near retirement.
Don’t forget the State of Maine Deferred Compensation Plan also offers a special, one-time “Plan Catch-Up Contribution” in addition to the Age 50 Catch-Up Contribution. For more information on the amount of catch-up contributions you can make, please call the Plan Administrator at 207-626-8457 or contact your FSO.
Age 55
If you are retiring at age 55 and rolling your balance over to an individual retirement account (IRA), look into the annuity exceptions that may be available with IRAs.
When you retire, you have several distribution options available under the State of Maine Deferred Compensation Plan. If you choose to have your account distributed to you over a period of fewer than 10 years, you are eligible to make a direct rollover to an IRA.
Once in the IRA, you may be able to avoid the IRS 10% early withdrawal penalty on distributions before age 59½, because there is currently a provision in tax law known as a “72(t) exception.” Using this exception, you can avoid the 10% penalty tax if you take “substantially equal periodic payments” (SEPP).
To take a SEPP from your IRA without penalty, you must withdraw money at least once a year, and you must keep taking withdrawals for five years or until you reach age 59½, whichever comes later. The 72(t) tax does not apply to 457(b) contributions distributed from a 457(b) plan. It only applies if you roll money into an IRA on amounts distributed from the 457(b) plan that are rollover contributions, attributable to non-457(b) amounts. As you approach retirement age, it’s a good idea to consult with a tax professional to outline a distribution strategy that can minimize the taxes you’ll pay.
Age 59½
You may no longer be subject to the 10% early withdrawal penalty on distributions under 10 years.
This means certain distributions from your retirement accounts would no longer be subject to the IRS 10% early withdrawal penalty. You should also look at the investment mix of your Deferred Compensation Plan account and other savings. It may be wise to rebalance your assets (that is, change the mix of investment options your money is in) in order to prepare for retirement. You can contact your FSO representative for help with your asset allocation.
Age 62
Earliest age eligible to begin Social Security benefits.
You can begin receiving payments at a reduced amount as is outlined on the personalized statement you receive from the Social Security Administration every year. You can also obtain an online estimate at www.ssa.gov.
Your benefit is reduced about one half of one percent for each month you start your Social Security payments before your Full Retirement Age (see below). For example, if your Full Retirement Age is 65 and 6 months and you sign up for Social Security when you are 62, you would get 77.5 percent of your full benefit.
Note: The reduction applicable for commencement of Social Security benefits at the age 62 will be greater for future retirees as the Full Retirement Age increases.
Age 65 to 67
You are eligible for Medicare coverage and you may be at current “Full Retirement” age for Social Security benefits.
At age 65, you are eligible to receive medical coverage from the federal government. It’s important to apply for Medicare benefits within three months of your 65th birthday. If you don’t, your Medicare medical insurance (Part B) may cost you more money. You can visit www.medicare.gov to get answers to all your questions about Medicare.
The “Full Retirement” age for Social Security is determined by the date on which you were born. If you were born on or before 1937, your Full Retirement age is 65. If you were born in 1938, your Full Retirement Age is 65 and 2 months. If you were born in 1960 or later, your Full retirement age is 67. To see what your Full Retirement Age is, please visit www.ssa.gov.
Age 70½
You must begin taking minimum distributions on pre-tax money if you’re retired.
If you are retired, you are required by law to take Minimum Required Distributions (MRD) from pre-tax money that you have been saving in any qualified retirement plan (such as State’s Deferred Compensation Plan) once you turn age 70½. If you're still working, you can leave your retirement plan account in the plan until you retire. At this stage, it’s important to know how distributions will affect your taxes, because once you start taking distributions the government will finally tax the money that has been accumulating in your plan account tax-free.
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