As we approach retirement, we often think about age 62, 65 or 67 being pivotal milestones in your retirement journey. While those birthdays are significant, there is another (half) birthday that is just as important: age 59 ½.
In this blog, we’ll explore why age 59 ½ matters and what considerations you should think about as you approach retirement.
Key takeaways:
For decades, you’ve likely been diligently putting money away to your 401(k), IRA, or other retirement accounts, with the dream of one day using that money to fulfill your retirement goals. That dream could start turning into reality at age 59 1/2, once the IRS allows you to start making withdrawals from your retirement accounts without incurring the 10% early withdrawal penalty.
This age also marks the start of what many call the “financial gap years” – which represent the interval between when you can start withdrawing and the start of required minimum distribution (RMDs). Financial gap years are the 13½ years (age 59½ to age 73 for people born between 1951 and 1959) or 15½ years (age 59½ to age 75 for people born in 1960 or later).
There are some exceptions that may allow individuals to access retirement funds even earlier. One of the most common is the Rule of 55, which permits certain workers who leave their employer during or after the year they turn 55 to access funds from that employer's retirement plan without the early withdrawal penalty. Watch this short YouTube video to learn more about how this works and if it would apply to you.
Deciding when to begin withdrawing from retirement accounts is one of the most important financial decisions you'll make. But the good news is, you have options. Just because you can start taking from these accounts, doesn’t mean you should. For many people, allowing those assets to remain invested for a few additional years can provide meaningful growth opportunities and increase future retirement income.
Factors that could play into that decision are:
The best approach will depend on your unique circumstances and retirement goals. Working with a trusted financial adviser several years before retirement can help you develop a strategy that aligns with your overall financial plan.
While every situation is different, there are several common reasons why some retirees choose to begin withdrawals at 59½ and why others decide to wait.
The years between retirement and the start of RMDs can present valuable tax-planning opportunities.
Individuals who expect to face higher taxable income later in retirement may benefit from strategically taking withdrawals during lower-income years. By spreading taxable distributions across a longer period, some retirees may be able to reduce the likelihood of larger withdrawals pushing them into higher tax brackets later in life.
However, this strategy is highly dependent on your personal financial situation, income needs, and tax outlook.
If you have a Roth IRA, the withdrawal rules are a little different. Since the money that you contribute to a Roth IRA has already been taxed, withdrawals from a Roth IRA are tax- and penalty-free, as long as you are at least 59 ½ and have owned the account for at least 5 years. For more specific details on the difference between a traditional and Roth IRA withdrawals, read the blog ‘Spending Down Your Savings: IRA Withdrawal Rules’.
Even if you don’t need the funds at that time, for some, this is a great opportunity to make some ‘big ticket’ purchases such as a home purchase, renovations, medical expenses, or other immediate needs.
Understanding your current financial situation and your future tax situation will help determine your optimal timing for beginning withdrawals.
If you’ve established that your retirement savings aren’t quite where you’d like them to be, the good news is that the last few years can be some of the most impactful when it comes to building additional wealth.
The IRS allows individuals over 50 to make additional ‘catch-up’ contributions to their 401(k) and IRA accounts.
For example, in 2026, people aged 50-60 can make catch-up contributions of up to $8,000 for workplace retirement plans, like a 401(k), and up to $1,100 for IRAs. And for those ages 60-63, they can take advantage of ‘super catch-up’ contributions of up to $11,250 for workplace plans.
What if you’re 59 ½ and your retirement savings are already on track for retirement? If you are not in a position where you need your funds right at 59 ½, and you’re not concerned with tax efficiency, delaying a few years to take advantage of catch-up contributions could potentially mean thousands more in your retirement pocket than you originally thought possible.
It’s not often that half-birthdays deserve recognition, but 59 ½ is one of them. For some, this milestone marks the start of retirement. For others, it means a final push in retirement planning.
The timing of your retirement withdrawals is just one of the many pieces that you must consider in your final years of retirement. You should also consider the timing of your Social Security benefits and medical insurance coverage.
But you don’t have to put the puzzle pieces together on your own. A financial adviser will be able to review your current financial situation, learn about your retirement goals, make detailed financial projections and help build a complete retirement plan that’s right for you. Click here to get connected with one of our advisers.