MARK RIEPE: I'm Mark Riepe. I head up the Schwab Center for Financial Research, and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision-making and the cognitive and emotional biases that can cloud our judgment.
This is one of our minisodes, where we generally don't have a guest. Instead, we dip into a topic we think deserves to be highlighted.
One of our investing principals here at Schwab is to establish a financial plan—and to make changes to that plan as your life circumstances change. When you think "life circumstances," you may think of marriage or having a baby.
But there's also aging. It seems less obvious, but believe it or not, getting older is a life circumstance. When you hit certain ages, guess what—your life circumstance just changed. And it isn't because you've changed; it's because various laws and regulations allow you to do certain things and in some cases prevent you from doing certain things.
That's what we're talking about today. The age milestones for your financial life as you near and enter retirement.[1] Before I get to the retirement ages, though, this age stuff starts young. There are age-based developmental milestones for kids that any parent is familiar with.
What you may not realize is that there are even age milestones about money. As in, the age where kids understand concepts.[2]
For example, age 3 is when children, on average, realize that money can be exchanged for goods. At age 4, they figured out you need money to pay for stuff. In other words, at age 3, most kids get that money is a thing and is it being traded for stuff. But at age 4, they realize that it's mandatory. You can't get the stuff unless you come up with the money. And between ages 7 and 9, kids understand the intent of advertising.
Now government-imposed age milestones are different. They tell you when you get to do something, get to stop doing something, have to do something, or have to stop doing something.
You're eligible to vote when you turn 18. That's the same age you're permitted to get a tattoo. You can drink alcohol when you're 21, and you can serve as president after you hit 35.
Retirement has a bunch of age-related requirements, and some of them come with hefty penalties if you don't do what you're supposed to do when you're supposed to do it. On the bright side, penalties for certain withdrawals disappear as we age.
And now, here's a run-down of those age touchpoints around retirement. Don't worry, we'll include a link to an article in the show notes that has all the details.
Let's start with age 50. You can make catch-up contributions to a company retirement plan or individual retirement account, also known as an IRA, also known as an "IRA." That can add up to a total of $31,000 for qualified retirement savings plans like the 401(k).
If you're 60–63, you can contribute a total of $34,750. The rules are a little different for Roth IRAs. If you're over 50, you can contribute $8,000 annually.
Next is when you turn 55, a couple of options open up. You can increase your contributions to your health savings account, or HSA. You can put an extra $1,000 into your HSA. That's above and beyond the limit of $4,300 for self-only coverage. Or $8,550 for family coverage.
If you retire during or after the year you turn 55, you might not have to pay the 10% tax penalty on early withdrawals from your employer-sponsored retirement account.
Our next mile marker is 59½. Now, generally, you can make withdrawals from IRAs or qualified retirement plans without having to pay the 10% penalty. If you have a lot in a tax-deferred account, you might want to consider drawing them down.
That's because it's possible that required minimum distributions, or RMDs, could push you into a higher tax bracket. Those start when you're 73. But, like many things, your mileage may vary. Your financial advisor can help you figure out your situation.
Let me make a small detour here. If you're like me, you're wondering about the half-year with this milestone. Why 59½? Why isn't 59 good enough, or what's wrong with plain old 60?
One of our subject matter experts, Austin Jarvis, weighed in. He's been on the show a few times. Austin said he believes it's because the government wants a year-long window around age 60. The half-year mark begins the year-long period on either side of age 60. In other words, six months before and after a 60th birthday.
He noted that insurance does the same thing. The moment you hit your half-birthday, your age rounds up.
OK. At age 60, if you're a surviving spouse, you become eligible for Social Security benefits.
At 62, you're eligible for early retirement benefits from Social Security. But the closer you get to 70, the larger your benefit. Something to keep in mind.
There's a big one at age 65. You become eligible for Medicare. This is one of those milestones that has a lot of rules. Medicare has specific enrollment periods, and you don't want to miss them. There are other rules about what to do if you're still working and have your employer's health insurance. And still other rules about HSAs and other things. Just be careful. Do your due diligence and make sure you avoid gaps in coverage.
Also at 65, you can tap your HSA for non-qualified expenses—meaning non-medical expenses—without the 20% penalty. Again, talk with a financial planner before making any decisions or withdrawals.
From ages 66 to 67, you become eligible for full retirement age benefits from Social Security. You'll want to talk with your advisor about this as well. You may want to wait for delayed retirement credits up to age 70.
Speaking of age 70, that's when you hit maximum benefits for Social Security. There's no advantage to waiting beyond age 70, because the benefits don't increase from there.
When you're 70½, you can give up to $108,000 from your IRA to certain tax-deductible charities. You can give to worthy causes and reduce your tax bill, since the distributions are excluded from taxable income.
And finally, our last age-related retirement benchmark is age 73. In general, this is when you'll have to take annual required minimum distributions, or RMDs. This applies to all your tax-deferred retirement accounts.
OK, if you just wanted the nuts and bolts, you can stop listening now. But if you're wondering how this all got started—the first government-sponsored old-age social insurance program—that was in Germany in 1889.[3] Chancellor Otto von Bismarck wanted to promote the well-being of workers. He also wanted to silence calls for more extreme socialist alternatives.
There's a myth around why the Germans chose 65 as the retirement age. The myth says that it's because that's how old Bismarck was. That's not true. 70 was their first retirement age. In fact, Bismarck was 74 at the time. They changed it to 65 in 1916, which was 18 years after Bismarck's death.
And the rules keep changing in modern times as well, so it's important to keep track.
But for one group, age is especially easy to keep track of. We think of age as an objective measure. You're born on a certain date, and your age is determined by that date for the rest of your life. Not true for thoroughbred racehorses in the Northern Hemisphere. No matter what date the foal is born, its birthday is January 1st of that year.[4]
If you're listening when this episode airs, the Kentucky Derby is just a couple of weeks away. The Derby is for 3-year-olds. So a horse born on, say, January 1st of 2022 would be three years, five months, and three days old on race day. But a horse born in June 2022 would be around six months younger. And likely at a disadvantage.
Let me wrap up by reminding you that you need to pay close attention and talk to your financial professional so you don't miss any deadlines and don't incur any penalties. Because while there are lots of dates to keep track of, you know them all in advance, and you can plan.
In other words, don't wait until the last minute to address these tasks and deadlines. It's more effort, but it's worth it. We put some resources in the show notes to help you do that.
There's also an episode we did on building your pre-retirement checklist.[5] You might want to give that a listen. If you have children in your life and want to teach them about money, Schwab has a terrific resource called Moneywise. It has lots of information to set kids up for lifelong financial success.
That's a wrap, so thanks for listening. I'll be back in a couple of weeks with another show. In the meantime, if you'd like to hear more from me, you can follow me on my LinkedIn page or at X @MarkRiepe. That's M-A-R-K-R-I-E-P-E.
And if you like the show, we'd be grateful for a rating or review on Apple Podcasts or comment on the show if you listen to it via Spotify. We always like new listeners, and if you know someone who might like the show, please tell them about it and how they can follow us for free in their favorite podcasting app. Personal recommendations are especially effective.
For important disclosures, see the show notes and schwab.com/FinancialDecoder.
[1]Williams, Rob, "The Most Important Ages of Retirement," schwab.com, March 6, 2025, https://www.schwab.com/learn/story/most-important-ages-retirement
[2] Schwabmoneywise.com/public/moneywise/teaching_kids
[3] Social Security History, Otto von Bismarck, Social Security website, accessed April 4, 2025, https://www.ssa.gov/history/ottob.html
[4] "Universal Birthday No Joke," Thoroughbred Daily News, accessed April 4, 2025, https://www.thoroughbreddailynews.com/universal-birthdate-no-joke-shared-archive/
[5] "How Can You Build Your Pre-Retirement Checklist?", Financial Decoder, November 13, 2023, https://www.schwab.com/learn/story/how-can-you-build-your-pre-retirement-checklist
