Turning points
Retirement is the beginning of a new phase of life that includes a number of milestones. Leaving the workforce and claiming your retirement benefits can be both exhilarating and confusing. Here are some of the new experiences retirees can look forward to.
Meeting your retirement savings goal
You have achieved financial freedom when you no longer need to work in order to pay all of your bills for the rest of your life. This financial security gives you the ability to walk away from a job whenever you want to or negotiate a part-time or flexible work situation.
Telling your boss about your retirement
There’s a certain satisfaction that comes from being able to tell your boss you’re simply not going to come into work anymore. Some offices or groups of colleagues have celebrations when people retire. From now on, you can work only if you want to.
Permanently shutting down your work computer
There will come a moment after your stuff is packed when you walk out of your office for the last time. You get to escape from boring meetings and tight deadlines, but you also won’t get another invite to a business lunch or holiday party.
The first time someone asks, “What do you do?”
Most people answer this question with their profession, but retirees need to think of a new answer. You may want to talk about your volunteer position or an important hobby, or have a quip ready about how you finally get to do whatever you want every day.
Qualifying for penalty-free retirement account withdrawals
After decades of saving for retirement, retirees finally get to spend some of that cash. Once you turn 59½, there’s no longer a 10 percent early withdrawal penalty to take money out of your individual retirement account. And workers who leave their jobs at age 55 or later can begin withdrawing money from their most recent 401(k) account without penalty. However, income tax will be due on each withdrawal from traditional 401(k)s and IRAs.
Taking your first required minimum distribution
After you reach 70½, you will be required to take withdrawals from your traditional retirement accounts each year. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn. However, distributions from Roth IRAs are typically not required in retirement.
Collecting Social Security payments
Workers pay into Social Security throughout their entire career, and many retirees are eager to collect. However, the age you sign up for benefits drastically changes the monthly payment you receive. Although you can begin collecting benefits as early as age 62, monthly payments are reduced if you claim payments before your full retirement age, which is 66 for most baby boomers and 67 for people born in 1960 or later. Monthly payments will increase for each additional year you delay claiming payments until age 70.
Signing up for Medicare
Beginning three months before you turn 65, you can sign up for Medicare. It’s important to sign up for benefits in the seven-month window around your 65th birthday, because premiums are sometimes increased for beneficiaries who sign up later. Medicare is likely to have different coverage and cost-sharing requirements than your previous health insurance plan, so it’s a good idea to examine how your benefits and medical bills will change.
Claiming senior discounts
One of the major perks of getting older is qualifying for senior discounts. If you’re willing to admit your age, you can often save money on food, clothing, entertainment and travel. Signing up for an AARP membership will also qualify you for a wide variety of discounts.
Realizing you don’t have to be anywhere
Retirees don’t have to get up early or report anywhere at a specific time. You’re free to turn off your alarm clock and linger over the newspaper. But you may want to make an effort to get out of the house and be with other people so you don’t become too isolated in retirement.
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10 Retirement Rites of Passage originally appeared on usnews.com
