Monitoring Early Retirement Milestone Birthdays

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When retiring, birthdays take on a new importance. Birthdays in early retirement define critical elements of retirement planning, such as healthcare eligibility, taxes assessed, and benefits received each month.

Milestone birthdays start at age 50, with qualified public safety employees taking tax-free withdrawals from qualified employer retirement plans and IRAs. Alternatively, employees become eligible after providing 25 years of service (whichever comes sooner). It frees eligible recipients from the 10 percent early distribution penalty (on top of tax) applied to others who take such distributions before age 591⁄2 (this rises to 25 percent with certain SIMPLE IRA plans).

Next, early retirees must pay attention to their 55th birthday. On this day, individuals become eligible to make penalty-free withdrawals from their qualified retirement plan. This applies so long as they leave their job when employment ends at age 55 or higher. The next milestone year is 591⁄2, when, regardless of employment status, all withdrawals from IRAs and qualified retirement plans become penalty-free.