The best time to retire isn’t always tied to your age. Financially, is there a better month or season to retire? February or November? Summer or fall? Learn when might be the best time of year to retire from a financial and tax perspective and get tips for end-of-year tax planning now.
When Is the Best Time of Year to Retire?
The best time to retire depends on your circumstances. There’s no cut-and-dried best time of year to retire for every person.
“Your retirement date is a highly personal choice that, ultimately, will be the right one if it’s right for you,” notes financial services provider Northwestern Mutual.
One consideration when timing your retirement is your work anniversary. If you work for a government agency or another employer that provides a defined benefit pension, you should confirm your initial service date before setting a retirement date, according to GOBankingRates. Experts recommend retiring on the date following the anniversary of your first day on the job. This way, you pick up another year of service credit toward your pension without needing to work beyond that date.
If you don’t have much in the way of cash reserves, you might need to withdraw money from your retirement accounts shortly after you quit working. If that’s the case, the best time to retire may be the very beginning or very end of the year, GOBankingRates suggests.
“This way, you’re not pulling a lot of money out of your retirement accounts during a year where you might be in a higher tax bracket with earned income,” financial planner Jason Silverberg told GOBankingRates.
You also might look at scheduling your retirement based on travel plans.
“Maybe you live in a four-season climate, and you can feel the crisp autumn winds starting to blow. Do you really want to stick out another winter driving into the office through slush and ice?” Northwestern Mutual asks. “If you’ve got big travel plans, why not get out of dodge, head to a warmer climate, and retire under the tropical sun before winter comes?”
Weather-related concerns also can play a part if you’re planning to relocate from one state to another after your retirement. For instance, you might want to move during ideal weather in both places to make the transition smoother.
And what if your travel plans include visiting your grandkids? You might want to retire after the end of the school year (typically in May or June) so you can spend even more time spoiling them.
What Is the Best Month to Retire?
Just as no season fits everyone’s retirement plans, no one month is best for everyone when it comes to retirement.
But if you’ll be relying on Social Security benefits, the best month could be connected to your birthday. That’s because you can reap full Social Security benefits if you wait until a particular milestone.
The Social Security Administration says full retirement age is the age when you can start receiving your full retirement benefit amount. Full retirement age would be 66 if you were born from 1943 to 1954. Full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born in 1960 or later, full retirement benefits are payable at age 67.
However, if you delay collecting benefits beyond your full retirement age, the amount of your retirement benefits will keep rising until age 70, the Social Security Administration writes.
Your birthday also becomes important when you’re figuring out when to withdraw retirement savings. As explained by financial services provider Principal:
- You may withdraw retirement plan savings without penalty if you leave your job or retire at age 55.
- You typically can withdraw money from qualified retirement plans or IRAs without IRS penalties at age 59½.
- You must start taking minimum distributions from retirement plans by age 72.
In addition, keep in mind that you qualify for Medicare benefits once you turn 65.