Ask Carrie by Carrie Schwab-Pomerantz

Dear Carrie: I'm turning 60 next year and keep hearing about different age-related requirements and milestones. For example: FRA? RMD? And when can I start withdrawing money from my 401(k) without a penalty? I want to make sure I don't miss something important. Can you help? — A Reader

Dear Reader: Although a lot of us may try to forget our age as the years go by, when it comes to reaping the financial rewards of getting older (and not getting dinged), you're wise to keep certain age-related milestones top of mind. But as might be expected, for the rules and regulations surrounding retirement withdrawals and government benefits, it's not as simple as just marking a birthday.

It's important to understand what you can do — and when — to help assure you don't make a costly mistake and miss out on all the economic perks you're entitled to.

Here's a checklist of basic ages to keep in mind and the significance of each:

— AGE 55: If you have assets in an employer-sponsored qualified retirement plan, such as a 401(k), and leave your job (called separation of service), you can take a distribution without paying the 10 percent penalty for early withdrawal. You will, however, pay income taxes on the money.

— AGE 59 1/2: At this age, you can take distributions from your qualified retirement plan or traditional IRA without penalty. Once again, you will pay income taxes on the earnings or any contributions that were tax deductible. If you have a Roth IRA and have held it for five years, you can withdraw these earnings both penalty- and tax-free.

— AGE 62: This is the earliest date you can begin taking Social Security benefits, unless you are disabled. Just remember that if you do, your payout will be permanently reduced by approximately 25 percent. And if you're still working and earn beyond a certain limit, benefits are further reduced. You can apply for Social Security when you're within four months of the first full month that you turn 62 years old. Before you decide to take Social Security at this age, consider how much more you could make over time by waiting. Go to www.ssa.gov for a convenient online calculator to help you determine the best time to start taking your benefits.

— AGES 65-67: Here's where FRA —"full retirement age"— comes in. This is the age you can begin receiving your full Social Security retirement benefits. FRA ranges from 65 to 67 depending on your birth year. It's also important to note that if you delay receiving Social Security beyond your FRA, your benefits will continue to increase until you reach age 70.

When you want to apply, there's now an easy online application at www.ssa.gov.

— AGE 65: At 65, you're eligible for Medicare — a very significant milestone considering the high cost of health insurance and medical care. If you're already receiving Social Security, you're automatically enrolled in Parts A and B. There's nothing you need to do. If not, you can apply for both Social Security and Medicare at the same time.

However, if you prefer to delay Social Security, you can still apply for Medicare alone. Ideally, you should apply three months before the month you turn 65. Just call or visit your local Social Security office, or call the SSA at 1-800-772-1213. You can't apply for Medicare online at this point. Note: You can choose to decline Part B coverage, but you may pay a penalty for late enrollment.

— AGE 70: As mentioned above, Social Security benefits don't increase beyond this age. So if you haven't already, you'll want to begin taking your benefits now.

— AGE 70 1/2: This is the age when you're required to begin taking money from tax-advantaged retirement plans, such as a traditional IRA, 401(k), Roth 401(k) 403(b), SEP, SIMPLE or 457 plan. The minimum you can withdraw — your Required Minimum Distribution or RMD — is determined by a formula based on life expectancy and the amount you have in tax-advantaged accounts. Your tax professional can help you determine your RMD. Also, some financial companies provide online calculators.

You absolutely must take your first RMD by April 1 of the year after you turn 70 1/2, or you will face a hefty 50-percent penalty! And if you wait until that date, you must then take your second RMD by Dec. 31 of that same year. So, it's really important to pay attention to this deadline. On the plus side, you don't have to take an RMD from a 401(k) if you're still working and never from a Roth IRA. And just for the record, RMD regulations were suspended for 2009, but only for 2009.

Being mindful of age-related dates and deadlines is only part of the picture. You also need to sit down and review your own financial picture —retirement accounts, Social Security benefits, other sources of income — and create a retirement budget and withdrawal strategy. It's not only about missing something, it's also about taking every opportunity now to secure your financial future.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER (tm) is president of the Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at askcarrie@schwab.com. This column is no substitute for an individualized recommendation, tax or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2009 CHARLES SCHWAB & CO. INC. MEMBER SIPC

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