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Best Time of Year to Pull the Plug
Old 10-20-2017, 12:58 PM   #1
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Best Time of Year to Pull the Plug

I feel very fortunate because hopefully I will be leaving the workforce on my own terms. My plan is to say goodbye to the working world on 12/31/2018. My thinking is that it will make filing taxes (I do my own) easier by having a complete working year followed by my first non-working year. This seems to make a lot of sense to me. I would love to hear some thoughts on why folks picked the time of year they did to pull the plug.
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Old 10-20-2017, 01:02 PM   #2
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It depends...

Working one day in 2019 will allow more Roth, IRA and 401K contributions. Another day in a month generally gets you the month's worth of healthcare and vacation.

When does your pension consider a calendar year, if you have one? How about bonuses? Are you medicare or SS age, that may play into it.

It's always a great day to quit work!
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Old 10-20-2017, 01:10 PM   #3
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Quote:
Originally Posted by Senator View Post
It's always a great day to quit work!

That should be your tagline.
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Old 10-20-2017, 01:33 PM   #4
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Originally Posted by Senator View Post
It depends...
Sure does.
Targeting 2018 here.
How easy it is to file income tax does not even make the list of my considerations.
Being able to Max. my contributions (and employer match) to 401(k) and IRA is important, meaning that I need at least $X of '2018 earnings.
Being employed on 3/1 adds about 8% to my pension (compared to exiting a day earlier).
Being employed on 6/30 reduces the "early retirement" penalty applicable to my pension with precisely 4%.
And on it goes...

Quote:
Originally Posted by Senator View Post
It's always a great day to quit work!
Generally true.
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Old 10-20-2017, 02:09 PM   #5
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If you income passes the SS max contribution for the year, I'd think working the rest of the year is a hefty raise.
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Old 10-20-2017, 02:16 PM   #6
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Not the time of the year per se, but I knew my company would let me keep the company health insurance for the remainder of the month, so quitting on the first day of the month was what I intended to do, although I ended up staying a week longer.


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Old 10-20-2017, 02:22 PM   #7
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I waited till after January because 5 weeks of annual vacation started Jan 1. And, a retiree could choose to get unused vacation paid in cash. Took the proceeds and bought a nice motorcycle.
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Old 10-20-2017, 04:09 PM   #8
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As already mentioned, there can be lots of considerations. For me, staying past my birthday saved $$ on my retiree medical contributions, and staying until the first of the following month kept me on employee (cheaper) health insurance for another month. I would have saved $$ on taxes if I had stayed on 3 more months, because I had deferred compensation that had to be taken in cash within 30 days of termination (if you were below retirement age, which I was). So that kicked me into a higher tax bracket, but my bucket was full and leaving when I did preserved a job for someone else since we were in the middle of staff reductions.
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Old 10-20-2017, 09:14 PM   #9
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There was a recent thread on this subject which was very interesting to me because it highlighted how companies operate so differently in how they handle benefits and retirement. Many of the responses had to do with profit sharing and bonus payouts, stock options vesting, accrual of vacation days and holidays, and extending the employer health insurance as long as possible.

best day in year to pull the plug?

For me the best time was at the end of my September birthday month when I reached age 62, the sweet spot for my pension that increased it by several thousand dollars. But I also got to avoid the end of fiscal year madness to include the dreaded performance appraisal. Our small bonuses were not worth it to me to go through that exercise. And I was able to max out my 401k and HSA for the year, had a good amount of vacation days to cash out, and did not have to pay Social Security on the cash out since I had reached the income limit.

Other reasons to retire at the end of September was that it is the nicest time weather wise in my area of the country so I am now enjoying 75 degree weather in October. And I will have the time to really enjoy the holidays (e.g., traveling to visit family, decorating, baking, shopping, sending out cards, attending holiday special events) without being rushed.
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Old 10-20-2017, 09:46 PM   #10
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To add to your IRA and 401k for the last time you can w*rk a bit into the new year so as to have earned income. You may not get an employer 401k match unless you w*rk most of a year, though this varies plan to plan.
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Old 10-20-2017, 09:52 PM   #11
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My employer deposited the flexible spending money on jan 1st - was nice to blow all that on glasses.
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Old 10-20-2017, 10:35 PM   #12
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Originally Posted by almost_there View Post
I feel very fortunate because hopefully I will be leaving the workforce on my own terms. My plan is to say goodbye to the working world on 12/31/2018. My thinking is that it will make filing taxes (I do my own) easier by having a complete working year followed by my first non-working year. This seems to make a lot of sense to me. I would love to hear some thoughts on why folks picked the time of year they did to pull the plug.
I also chose December 31. I figured it would be easier tax wise, plus I was going to go on the ACA for my insurance in January and figured it would be easier to pick that date.
Another factor was I wanted to retire ASAP, and I had to give three months notice on my lease.
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Old 10-21-2017, 09:25 AM   #13
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My departure date was on the first Friday of November 2016. This allowed for max accrual of PTO cash out, remaining on employer health plan until the end of the month and election of COBRA coverage until EOY if we needed it.

We went on the ACA for health coverage beginning Jan. 1st. Cashing out unused PTO, sick leave and severance prior to the previous year's end was key in minimizing MAGI in 2017 so as to be eligible for premium subsidies.
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Old 10-21-2017, 09:38 AM   #14
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One thing I did not see mentioned is date of 401K match. My employer is also very specific in that you have to have employment end at month end. Your last day, of course, can be at any time provided you have PTO to cover it.
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Old 10-21-2017, 10:14 AM   #15
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Most of the comments were on financial considerations.

There is a good section of my mind that recommends retiring right after the busiest part of the year so that the company has the most time to recover from your departure. Give them the most notice and make sure you document everything. This is the path I have chosen in leaving jobs. I hate that part of my mind.

The dark side is a great section of my mind. You can randomly, just decide in the middle of the day that you are tired of whatever nonsense you have to put up with. Don't have a deep discussion with your supervisor or HR idiots. Just tell some person "Hey, tell Boss person I am gone." Or send a brief email to Boss and HR on your way out the door. "Hey, I am done. Left keys and company equipement on my desk. Mail paperwork to my address."
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Holiday pay?
Old 10-21-2017, 11:07 AM   #16
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Holiday pay?

If you stay on one more day, will you get paid for the 1 January holiday? It won't be the decisive piece of your financial picture but it's "free" money you won't have to w*rk for.
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Old 10-21-2017, 12:06 PM   #17
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My employer matches 3% of yearly salary, but unfortunately per month. A month does add enouh for a full year of Roth, and a quarter an extra weeks paid vacation time. End of the year not the best choice for me.
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Old 10-21-2017, 01:10 PM   #18
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Originally Posted by Perryinva View Post
My employer matches 3% of yearly salary, but unfortunately per month. A month does add enouh for a full year of Roth,
I'm confused. A ROTH IRA is $5500. So by my math (which I am sure is wrong) you make $2.2 mil/yr? "A month does add enouh for a full year of Roth" Surely I am missing something.
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Old 10-21-2017, 01:43 PM   #19
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You can also plan a trip and quit just before it. Unless you have a reason for quitting in a certain time frame, work until you are at your most favorite time of year.

It doesn't pay to quit, then just suit around all day wondering what to do.
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Old 10-21-2017, 04:26 PM   #20
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I had to run a similar scenario this past week. I've put my name in the hat for a department funded buyout. It's pretty significant and I will find out if I will receive the buyout by November 15th for a December 15th separation date. That would be the States choice.

Now, if I do not win the "Buyout Lottery" I still want to separate. I have a pre planned vacation from 12/15 - 12/26. So I will wait until I return from vacation before putting in my notice for a quit date of 01/19/2018.

Why will I wait ? Because I didn't want to pay taxes on my accrued leave this year. I also would receive 5 paid holidays, another 2 1/2 days of sick and annual leave, health insurance paid through the end of February + by receiving taxable income in 2018, I would be able to contribute to my Roth.

Either option would work for me and the preference would be to be offered the buyout.

Michael
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