Retirement: Decades of working and planning have gone into reaching this incredible milestone. Now, what was once an abstract concept, is within one calendar turn of becoming your reality.
And as you reach the finish line on your working days you might be wondering if there’s an ideal time of year to retire. Should you set the date in December? Or should you push it to the new year? After all, you’ve done all that planning to get here — why not stick a perfect landing and set sail into retirement with the wind at your back?
Frankly, there really isn’t a “best” time of year to retire. Your retirement date is a highly personal choice that, ultimately, will be the right one if it’s right for you. Everyone’s retirement plans and financial situations are different, which further changes the calculus from one person to the next. However, broadly speaking, if you’re looking to hit a sweet spot with your retirement date, here are a few topics you might want to consider or even discuss with a financial advisor.
WILL YOU HAVE A GAP IN HEALTH COVERAGE?
This is one you’ll want to think through regardless of when you choose to retire. You’ll want to avoid a gap in coverage as you leave your workplace. Check with your human resources specialist at work to see how your coverage works from month to month, and time your enrollment to avoid a gap in coverage. If you’re retiring before age 65, you can pick up coverage through your spouse’s plan, COBRA or public/private health insurance marketplaces (retirement triggers a special enrollment period). Keep in mind, few employers will subsidize COBRA costs, so you’ll likely pay full price.
If you’re planning to retire after age 65, make sure you enroll for Medicare. You’re required to do so, even if you continue to work. You may still be able to stay on your employer’s health plan in some capacity, but you’ll still need to enroll for Medicare or you may be charged a penalty.
DO YOU HAVE SOME BENEFITS TO COLLECT?
Now, there’s no standard advice here because everyone’s workplace benefits are a little different. However, it’s common for certain perks and benefits to kick in at certain times of the year. Perhaps your company has a profit-sharing plan that distributes funds at a certain date each year. You might want to stick around to collect that last profit-share check.
If you’re a federal employee or work at a business with a defined pension plan, check your records to see your official first day of service. If you retire one day after your work anniversary, you might notch another full-service credit toward your pension calculation. When does your annual bonus check come? Do you have vacation time that can be cashed in?
These are just a few examples, but dig into your benefits to see if there's date-specific income headed your way in the coming year. Why leave money on the table?
DO YOU WANT TO ‘TOP OFF’ YOUR RETIREMENT ACCOUNTS?
Before you retire, maybe you want to max out your contributions to your 401(k) and other tax-advantaged retirement savings accounts. It all depends on your salary, but one option is to retire after you’ve contributed the maximum allowable into your retirement accounts to “top off” the tank one last time before you start relying on those savings for income. Once you hit those limits, hit the exit! Sure, it’s just one year, but with dividends and interest, those final contributions will grow and could come in handy years down the line.
WHAT’S THE SEASON?
No, seriously. Marking your retirement date based on the season may sound arbitrary, but hear us out. Maybe you live in a four-seasons 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? 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?
Or, maybe you’ve been looking forward to more time with the grandkids. Timing your retirement in May or June as the school year wraps up could be a great way to kick off a summer of adventure with them! This is a huge milestone, so while you want to make good financial choices, your finances are only one part of the equation. After all, if you started planning for retirement decades ago, a few months here or there isn’t going to make or break the next several decades.