The term "59½" refers to the age at which individuals can begin to withdraw funds from their 401(k) or IRA retirement accounts without incurring an early withdrawal penalty. This age is significant because it marks a transition point for accessing retirement savings, allowing for more financial flexibility as individuals approach retirement. Before reaching 59½, withdrawals from these accounts typically incur a 10% penalty in addition to regular income taxes. Understanding this age threshold is crucial for effective retirement planning, as it helps individuals strategize their savings and withdrawal plans to maximize their financial security in later years.