Savings milestones for retirement

One of the most eagerly anticipated milestones comes at age 59½. That's when you can begin making penalty-free withdrawals from your 401(k). Distributions before that age get hit with a 10 percent early-withdrawal penalty, and you also have to pay income tax on the amount taken out. Some exceptions exist for workers age 55 and older, but all of those disincentives disappear six months after your 59th birthday. That's when you can begin taking distributions, or set amounts you'd like withdrawn every month. You can also take out your money in a lump sum, says Jean Setzfand, director of financial security for AARP.

Before you cash out, retirement advisers urge a little caution. You don't want your money to run out too soon.

"People are living much longer now," Fryer says. "Nowadays, for a married couple that makes it to age 65, odds are very good they'll live until their 80s, and perhaps 90s."