Target Retirement Month

[MrSmee]

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.

 

[Morgan22]

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.

 

[RunningBum]

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.

 

[jazz4cash]

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.

 

[momoftwo]

July 5th. My independence day.
July is when pension contribution is deposited.

 

[GalaxyBoy]

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.

 

[pacergal]

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.

 

[Alex The Great]

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.

 

[Act2]

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.

 

[Irishgirlyc58]

I retired on 12-30-2021.
This allowed for me to maximize my pension with my age and service credits.
I didn’t 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 it’s a perfect palindrome. [emoji23]
But interestingly waiting until after my quarter birthday 12-5-21 increased my pension by an amount I didn’t 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.

 

[MrSmee]

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.

 

[iloveyoga]

I picked by the weather! I wanted to retire in good weather so I picked April 30 as my last day, 10 years ago.

 

[skyking1]

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.

 

[HI Bill]

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.

 

[N02L84ER]

I had no financial incentives (contract labor, pre-ACA), so I retired April 5th when the weather started getting nicer.

 

[WhenIsItTime]

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!

 

[RxMan]

I don’t 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.

I’ll 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.

We’ll see. I randomly chose April 30th on my countdown app but even the year I picked is just a guess at this point. I’m 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!

 

[Al18]

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.

 

[Blue Poles]

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.

 

[levindb]

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 year’s salary when I left. That was on top of the 3.5 months I had earned that year…so that departure date kept my taxes reasonable with my IRA contribution.

 

[big-papa]

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.

Lots of things to consider. I'm retiring in June this year in order to snag one last chunk of RSU's. We've met our deductible for the year already so we're going to go with Cobra through the end of the year before changing to an ACA plan starting in 2024.

Have plenty of cash on hand to last till the end of the year before starting withdrawals in 2024. Will be thinking about what that might look like later in the year to see if at least for the first year we can do a Roth conversion...

Cheers.

 

[scrabbler1]

Lots of different reasons for everyone. For me, I left 10/31/2008. Remember, the markets were crashing so I was getting out while my company stock price was still high. It had dropped just under 2% in its 3rd quarter evaluation a month earlier, when I gave my notice. It would drop more in the 4th quarter evaluation before eventually rebounding (and I surely didn't want to keep working and waiting for that to happen). The company actually took frozen ESOP shares away from their employees at that time instead of giving them additional ones like they usually did at the end of every year.

The big bond fund I was planning to buy into with the proceeds of the company stock sale (an ESOP, so I had to sell it all, per plan rules) saw its price dropping a lot, so I was eager to buy into it at rock-bottom prices, something I have benefitting from for the last 15 years.

I didn't like the idea of commuting to work, even as little as 2 days a week, for another cold winter.

I was already on COBRA because I reduced my weekly hours worked from 20 to 12 back in mid-2007, making me ineligible for the group health plan. That COBRA plan was due to expire at the end of December (18 months), and I didn't want to have the twin burdens of working AND having to buy an expensive, individual, non-COBRA plan (pre-ACA, remember) at the same time.

My next annual bonus wasn't due until the following April, so there no sense sticking around for that.

One downside of leaving so late in the year was that the big ESOP payout threw the rest of my income, mostly wages, into the AMT territory, costing me an extra $5k. But I was able to use NUA (Net Unrealized Appreciation) on most of it which saved me a bundle in taxes.

 

[Dash man]

I retired at the end of March ten years ago to be able to max out my 401k and do a backdoor Roth IRA for that year. I also took three weeks vacation after I gave notice the first of the year. It worked out nicely.

 

[Montecfo]

I retired in May, and made my last paid date with vacation take me to June 1 so I got paid insurance for June.

There were no other bennies no pension etc. But I scheduled a vacation right after my last day so I could not agree to stay on a bit longer!

The main reason for the timing was to retire into good weather.

 

[BlueberryPie]

Lots of good discussions and not one size fits all.
There is often a good case for either doing it early in the year (get started with retirement-style taxes, maybe squeeze in one extra Roth conversion), or waiting long enough to max out your 401(k) by putting most of your paycheck towards those for a few months.

In my case (not that I am FI ready enough to retire) I would wait till the end of April because that's when the prior year bonus is paid. I would probably announce I'm retiring in early February and set the date to April 30th.
I would probably contribute my entire salary leading to that to a Roth 401(k) and some HSA, the company would also put some of the bonus towards the 401(k).
I would only get 4 months worth of company match I think, unless the company trues you up when you leave, but I wouldn't work another 8 months just for the match.

I'm not sure what I think of using vacation to work at 50% for a while. It would be good for my colleagues but I'm worried about suffering from short-timer syndrome and hate the 2 weeks on. Definitely, something to ponder.