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Target Retirement Month
Old 05-05-2023, 04:04 PM   #1
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Target Retirement Month

My thought was to make my last official day early January. I have enough after tax money to cover the first couple of years. That way I would be able to stay in the 0% capital gains range and I would take all my gains that year. Any reason to do otherwise? Just trying to finesse that first year.
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Old 05-05-2023, 04:19 PM   #2
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I made my last day December 1st. My vacation time payout carried me through the end of the month and was able to keep my health insurance through the end of the year also.
Then January 1st started a fresh new tax year.
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Old 05-05-2023, 05:40 PM   #3
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Originally Posted by MrSmee View Post
My thought was to make my last official day early January. I have enough after tax money to cover the first couple of years. That way I would be able to stay in the 0% capital gains range and I would take all my gains that year. Any reason to do otherwise? Just trying to finesse that first year.
Your reasons are solid. That low income year could also get you a good ACA subsidy or Roth conversion space.

Others may choose different times. A big one for those with a pension or other retirement benefits is to retire after a service anniversary date when they've reached full vesting. Others may wait for a yearly bonus. Getting full match on a 401K could be another reason. Waiting until the new year to take any separation payment as well as vacation and sick pay to avoid an income spike (with tax spike) in the previous year can also make sense. And some people would just like to retire before a favorite time of year, whenever that may be. And I know someone who had a couple of super stressful times of year and they retired before facing one more of those. While that last one may sound like shirking of responsibility, I know knew they were really getting crapped on with no support from upper management, who were just trying to flip the company anyway.

Anyway, if you don't have a strong reason to retire any other time of year, I think you have it right to go in January.
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Old 05-05-2023, 06:08 PM   #4
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My employer pro-rated vacation time for early retirees but if you hit the age +yrs of service target you could leave Jan 2nd and get your full vacation.
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Old 05-05-2023, 06:58 PM   #5
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July 5th. My independence day.
July is when pension contribution is deposited.
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Old 05-06-2023, 07:23 AM   #6
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Some people have their employer withhold the maximum amount allowed by their plan for their 401(k) for several months so they can have save up to the annual cap allowed by IRS in their last year. One last hurrah of tax-advantaged savings. Same for IRAs, if eligible.

Health insurance usually goes to the end of the last month of employment so I chose to retire on a 3rd, which was a Friday. OTOH, after 30 years of retirement that one extra month of paid health insurance might not be a big deal in the grand scheme of things.

As others have said, check your employer's policy on un-used vacation. Most of my employers accrued vacation hours at each paycheck, but others gave it to you in one fell swoop at the beginning of a year. I had one job where they didn't pay you at all for un-used vacation. This may vary depending on whether an employment contract is involved and on state law.
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Old 05-06-2023, 11:28 AM   #7
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At my former work place, if you retired before the 14th, your health insurance ended on the last day of that month. If you retired on the 15th or later, your insurance ended on the 30th of the following month. I retired after the 15th, I also needed to work until age 60 for health insurance benefits until Medicare.

Your retirement date is specific to you, your work, and your financial decisions.
Sounds like early January works for your needs.
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Old 05-06-2023, 11:35 AM   #8
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On my opinion it make sense to choose the retirement date wisely, to take advantage of certain events. My current plan is to retire on October 15th this year because of the following:
- stock options vesting
- 401K match vesting
- semi-annual bonus
- sign-in bonus return condition expire
Before that happen I'm trying to contribute as much as possible into ordinary 401K and after tax 401K plans.
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Old 05-06-2023, 11:46 AM   #9
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I will probably retire on a date far enough into the year that I get another maxed out social security tax year. With my cashable PTO, that will be a few months into the year. I have a good social security wage history, but certainly not 35 years at the maximum social security taxed wage. A little increase in social security benefits for each high wage year I add at the end.
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Old 05-06-2023, 12:11 PM   #10
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I retired on 12-30-2021.
This allowed for me to maximize my pension with my age and service credits.
I didnít want to flip over into the next year because my pension provides for a COLA in May starting with the second year of retirement. By retiring on 12-30-21 instead of January 2022 I get my first COLA in May 2023. Got it this month as planned!

FWIW- I determined that the best retirement date would have been 12-02-2021 because itís a perfect palindrome.
But interestingly waiting until after my quarter birthday 12-5-21 increased my pension by an amount I didnít want to give up.
Then we flipped into the holidays and why not get paid for those one more time.

I spent a lot of time running numbers on spreadsheets to determine the best date financially to retire.
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Old 05-06-2023, 12:36 PM   #11
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Originally Posted by GalaxyBoy View Post
Some people have their employer withhold the maximum amount allowed by their plan for their 401(k) for several months so they can have save up to the annual cap allowed by IRS in their last year. One last hurrah of tax-advantaged savings. Same for IRAs, if eligible.
That's a great point. Our contribution limits reset on July 1 so I will have those 6 months to max out my contribution for that last year. I usually front load all my contributions anyway so I get the full year impact.
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Old 05-06-2023, 01:20 PM   #12
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I picked by the weather! I wanted to retire in good weather so I picked April 30 as my last day, 10 years ago.
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Old 05-06-2023, 02:33 PM   #13
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DW gets a profit sharing bonus in March, so we initially planned on April 1 of this year for both of us. Now she may hang on for that date next year but it is up to her.
There is no magic date for my employment, but we will have a big tax credit from the home build and I'll work at least until we get into the new house next July-ish to get the most out of that.
Any excess credit carries forward to the next tax year. If we time it right we will have no taxes to pay for tax years 24 and 25 from that.
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Old 05-06-2023, 03:24 PM   #14
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I ER'd in early March. Allowed me to max out the 401(k) contributions, plus catch-up contributions, with a withholding rate of 70+%, paying 0% federal tax on all of my earned income for that year. I had to contend with PTO (vacation) payout for unused leave, dividends, and some Non-Employee Compensation, and then maxed out the LTCGs 0% tax bracket, paying ~$5K in Federal taxes. By retiring on the 5th of March, I got the company to pay for 'their portion' of that month's insurance, transitioning to ACA insurance in April.
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Old 05-06-2023, 04:16 PM   #15
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I had no financial incentives (contract labor, pre-ACA), so I retired April 5th when the weather started getting nicer.
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Old 05-06-2023, 04:18 PM   #16
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Originally Posted by iloveyoga View Post
I picked by the weather! I wanted to retire in good weather so I picked April 30 as my last day, 10 years ago.
If you are in a place with 4 seasons, this is way more important than taxes.

But before weather, is vesting in bonuses, 401k match, stock options, etc. Most leave some on the table, but limit what you can while still getting out the door!
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Old 05-07-2023, 09:48 AM   #17
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I donít have any financial incentives to wait until a certain time of year. I will probably pick spring because the weather will be nice and it will give me a few months for one last contribution to my 401k plan as well as to max my Roth IRA.

Iíll be too ready to go to wait until the latter part of the year. That will also be the time of year when the weather is less appealing for outdoor activities.

Weíll see. I randomly chose April 30th on my countdown app but even the year I picked is just a guess at this point. Iím simply using the countdown as a motivational tool.

Some posters have good reasons to wait until certain times of year to trigger financial incentives. If you work in certain fields your fiscal year might no coincide with the calendar year. And others get fed up and just leave as soon as they can because the BS bucket can start go overflow at any time!
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Old 05-07-2023, 12:37 PM   #18
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The beginning of January is a good time to retire. You’ll likely have a final check for unused vacation time. You can use some of this money for a final Roth IRA contribution.
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Old 05-07-2023, 04:16 PM   #19
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Originally Posted by RunningBum View Post
And I know someone who had a couple of super stressful times of year and they retired before facing one more of those.
While that wasn't my main reason for leaving when I did on April 8, it was a consideration. Of course, this was the year we lost our CPA, so the work stress was replaced by the stress of doing my taxes myself right after retiring. I also lost out on getting a performance bonus, but missing that work stress was worth it.

Edited to add: I don't recommend retiring during tax season. YMMV.
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Old 05-07-2023, 06:35 PM   #20
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For me, I had 6 weeks of vacation available as of January 1.

I took 2 weeks off in January
I took 2 weeks off in February
I took 2 weeks off in March
I retired after 2 weeks in April

This gave me time to get used to not being at the office. This gave my colleagues time to get used to being without me.

I was also given a yearís salary when I left. That was on top of the 3.5 months I had earned that yearÖso that departure date kept my taxes reasonable with my IRA contribution.
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