Don’t let anyone tell you that your birthday is just another day. Each revolution around the sun may mean greater access to your retirement savings and other assets. That’s worth celebrating. As you start to prepare for retirement from AT&T, there are some birthdays that are more important than others.
Your age is a major factor in everything from your AT&T pension to your AT&T 401(k) to Social Security. An understanding of what changes at what ages can help you determine the most appropriate time to retire. You can avoid unnecessary tax penalties and reductions to your benefits. It’s all about finding the right balance between maximizing your assets, limiting any costs and taxes and fulfilling your financial goals on your desired target dates.
Here are the key AT&T retirement dates to mark on your calendar.
Your 55th birthday
When you turn age 55, you gain full access to your AT&T 401(k) account. That means, if you leave AT&T after reaching this age, you can withdraw money from your account without having to pay the 10% early withdrawal tax penalty. However, distributions are still taxed at your ordinary income rate.
The day you turn age 59 ½
Similarly, when you turn age 59 ½, you get flexibility with your Individual Retirement Accounts (IRAs). Withdrawals are no longer subject to the early withdrawal penalty. Traditional IRA distributions are taxed as ordinary income. Withdrawals from Roth IRAs, on the other hand, are tax-free.
Your 62nd birthday
The earliest age at which you can start collecting Social Security is 62, except your benefit will be permanently reduced. The size of your reduction depends on the number of months before your full retirement age (age 66 or 67, depending on your date of birth) that you start collecting benefits.
Receiving benefits at the earliest age, 62, means you are subject to the maximum discount. The maximum discount is 25% if your full retirement age is 66 and 30% if it is 67. That discount amount decreases the closer you are to your full retirement age when you begin collecting benefits.
Your 65th birthday
Once you turn 65, you are eligible for Medicare. An Aon Hewitt representative will then be in touch with you to discuss AT&T retiree benefits.
Your 70th birthday
You will receive your full Social Security benefit at your full retirement age. But if you choose to delay taking benefits beyond your full retirement age, you can earn a delayed credit for every month you wait until age 70, which is when your benefits max out.
Delayed credits can increase your benefit by up to 2/3% per month, or 8% a year. Therefore, if you wait until age 70 to file, you will maximize your individual benefit.
Your 72nd birthday
Required Minimum Distributions (RMDs) are the amounts the federal government mandates you to withdraw annually from your pre-tax retirement accounts. Essentially, they prevent you from keeping retirement funds in your accounts indefinitely.
You must take your first RMD in the year in which you turn 72. You can, however, delay your first distribution until April 1 of the year following the year in which you turn 72. (Before 2020, RMDs were mandatory upon turning age 70 ½.) All subsequent distributions must be withdrawn each year by December 31.
Failing to properly take your full RMD can result in a hefty fee. In the event you fail to withdraw your RMD on time or withdraw less than the full RMD amount, a 50% excise tax is applied to the amount that has not been withdrawn.
For more important information that will help you plan for retirement from AT&T, download our complimentary ebook and request to speak to a financial adviser who is experienced with all of AT&T’s benefits.