At What Age Can You Start Drawing Retirement?

Retirement benefits refer to any benefits that are saved or invested for the expressed purpose of generating an income when you retire from your career. These benefits may be invested inside of designated accounts or they may be held with an employer through a pension system. The IRS affords special tax benefits for retirement savings, but it also imposes restrictions on when you may start drawing your retirement benefits -- usually age 59 1/2.

Process

The process for claiming your benefits requires that you contact your brokerage firm or your employer to begin the process. A distribution form is generally required for you to receive benefits. Your distribution form tells your employer or brokerage firm when you want to receive your money. In the case of 401k plans, the form must be obtained from your employer's human resources department. In the case of IRAs, the form must be obtained from your insurance company or brokerage firm. For other retirement benefits, like pensions, your employer will send you a form that you must fill out and sign to receive your benefits.

Significance

Retirement benefits can be obtained only after you request a distribution and the IRS restricts distributions until you are age 59 1/2. At 59 1/2, you may take any amount of money you want from your retirement account. Pensions require that you choose a pension payment plan before you receive benefits. Employers do not pay benefits until you've reached your normal retirement age (59 1/2).

Benefit

The benefit of receiving retirement benefits at age 59 1/2 is that you don't run out of money too early. If you were to take your retirement benefits prior to age 59 1/2, you may spend your entire retirement savings before you die. The IRS regulations help you guide you in retiring at an age when you have a reasonable chance of living throughout retirement without running out of money. Also, the retirement age encourages you to save for a longer period of time than you might otherwise consider.

Disadvantage

The disadvantage to retirement withdrawal restrictions is that it's much harder to retire when you really want to. While you are encouraged to save for longer with a set retirement age, you may have determined that you have enough money now to retire. If you want to retire early, you must either pay a penalty of 10 percent or file special paperwork under IRS rule 72(t) to take early distributions. In essence, you don't have control over when you retire. The IRS dictates this to you, at least in regards to the retirement funds it regulates.

References

• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition;" Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Life Insurance;" Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
• "Ernst & Young's Personal Financial Planning Guide, 5th Edition;" Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004
• IRS: Publication 590