When to retire - early, mid, end of year

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D Newton
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When to retire - early, mid, end of year

Post by D Newton »

Hello,
I am considering retiring June 2021; i am 64 yrs old; wife will be 58 but she will continue to work 2 days a week; i might consult a bit, which i can do, if i find something interesting. We have no debt...and we are fortunate to be in good health and we have 'enough'. I have heard differing opinions as to when to retire in a given year. Am i better off waiting till end of 2021 to retire or mid year (June/July) for social security reasons or tax consequences? The years are getting 'precious' and the thought of working full time through next year is starting to look less appealing to me.

Thank you in advance for any advice.
Regards, | Doug
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beernutz
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Re: When to retire - early, mid, end of year

Post by beernutz »

I feel you as I'd planned to work to 2023 when I was 64 but I've decided life's too short so I'm moving that date up to June 2021 and 62.

When to retire was easy for me as I'm a 9 month faculty being paid over 12 months with an October fiscal year end. If I retire in June I start my pension then but keep getting faculty salary until October. Apparently June is the most popular teacher retirement month by far for this very reason.

This probably doesn't help you but congratulations anyway!
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
Hockey10
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Re: When to retire - early, mid, end of year

Post by Hockey10 »

Ignoring any financial considerations, how about retiring when the weather at your location starts to get nice. Where I live, that would be April.
sport
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Re: When to retire - early, mid, end of year

Post by sport »

I was going to retire at the end of a year. However, the company I worked for credited the year's vacation time on the first working day of the new year. So, I waited until my return from the new year holiday and told my boss I would retire at the end of January. By doing it that way, I received my 3 weeks vacation pay, gave a nice notice to allow for transition, and just in case they told me to leave right away, I would still have my vacation pay.
humblecoder
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Re: When to retire - early, mid, end of year

Post by humblecoder »

D Newton wrote: Mon Nov 23, 2020 2:18 pm Hello,
I am considering retiring June 2021; i am 64 yrs old; wife will be 58 but she will continue to work 2 days a week; i might consult a bit, which i can do, if i find something interesting. We have no debt...and we are fortunate to be in good health and we have 'enough'. I have heard differing opinions as to when to retire in a given year. Am i better off waiting till end of 2021 to retire or mid year (June/July) for social security reasons or tax consequences? The years are getting 'precious' and the thought of working full time through next year is starting to look less appealing to me.

Thank you in advance for any advice.
For me, the considerations would be purely employer specific. The earliest that I would retire is April, since that's when I would earn a year of service for pension and retiree health benefits purposes. The latest that I would retire is probably June or July. Any later than that, and it would make sense to stay on through the end of the year to earn my yearly bonus, which is paid to anyone employed on 12/31.
Normchad
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Re: When to retire - early, mid, end of year

Post by Normchad »

For me, I won’t even broach the topic until after my end of year bonus hits the bank. So probably in January of some year for me.
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JoeRetire
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Re: When to retire - early, mid, end of year

Post by JoeRetire »

D Newton wrote: Mon Nov 23, 2020 2:18 pm I am considering retiring June 2021; i am 64 yrs old; wife will be 58 but she will continue to work 2 days a week; i might consult a bit, which i can do, if i find something interesting. We have no debt...and we are fortunate to be in good health and we have 'enough'. I have heard differing opinions as to when to retire in a given year. Am i better off waiting till end of 2021 to retire or mid year (June/July) for social security reasons or tax consequences?
Why are you waiting until June next year? What significance does that date have?
What is your plan for starting Social Security benefits? Can you afford to wait until you are 70 to start?
Any pension considerations?
Any travel already planned for 2021?

Once I was ready to retire, I waited about 6 months until a critical project was completed. That gave the members of my team a chance to get themselves into the best possible position.

I considered waiting even longer so as to make sure I got my annual bonus (usually handed out in late August or early September), but I figured that would end up in a series of "wait until next year" situations, so I left at the beginning of July. I ended up unexpectedly getting my full bonus anyway - a pleasant surprise.

I don't know of any tax advantage for waiting until year end. And if you are planning (like me) to wait until 70 to start your Social Security benefits, that isn't a consideration.

For many employers, your insurance is covered through month-end. So leaving early in the month means you have a few weeks before you need to pay for COBRA or an ACA plan.
Last edited by JoeRetire on Mon Nov 23, 2020 3:14 pm, edited 1 time in total.
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MathIsMyWayr
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Re: When to retire - early, mid, end of year

Post by MathIsMyWayr »

beernutz wrote: Mon Nov 23, 2020 2:26 pm I feel you as I'd planned to work to 2023 when I was 64 but I've decided life's too short so I'm moving that date up to June 2021 and 62.

When to retire was easy for me as I'm a 9 month faculty being paid over 12 months with an October fiscal year end. If I retire in June I start my pension then but keep getting faculty salary until October. Apparently June is the most popular teacher retirement month by far for this very reason.

This probably doesn't help you but congratulations anyway!
DW is also a university faculty. Her school is on a quarter system and many quarter courses are continuation throughout an academic year which makes the timing of a professor's retirement is a little tricky. Unlike "regular" employments, they do not cut the tie with the university completely. School provides emeritus professors with some privileges such as full campus access including library use and preferred parking. Occasional office space? Her next Sabbatical is also almost up. The school, a state university, requires a full year's teaching after a sabbatical. All these imply retirement is at least 2+ years away. Professors are paid for the 9-month academic year, but they can opt for a 12-month payment schedule. If you retire in June after only 9 months of teaching, do you get a full year, i.e., 12 months of credit toward the length of service for the pension benefit?
Soon2BXProgrammer
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Re: When to retire - early, mid, end of year

Post by Soon2BXProgrammer »

D Newton wrote: Mon Nov 23, 2020 2:18 pm Hello,
I am considering retiring June 2021; i am 64 yrs old; wife will be 58 but she will continue to work 2 days a week; i might consult a bit, which i can do, if i find something interesting. We have no debt...and we are fortunate to be in good health and we have 'enough'. I have heard differing opinions as to when to retire in a given year. Am i better off waiting till end of 2021 to retire or mid year (June/July) for social security reasons or tax consequences? The years are getting 'precious' and the thought of working full time through next year is starting to look less appealing to me.

Thank you in advance for any advice.
what is your healthcare plan? that normally affects peoples plan. ACA? cobra? etc?
02nz
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Re: When to retire - early, mid, end of year

Post by 02nz »

If your salary is high, your net pay for a day of work in December is much lower than in January. At the beginning of the year you're filling up the standard deduction or 10/12% brackets, while at the end of the year the marginal tax rate will be higher, maybe close to 50% with state income tax. Keep that in mind if you need a reason to retire a little earlier in 2021. :happy
MathIsMyWayr
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Re: When to retire - early, mid, end of year

Post by MathIsMyWayr »

02nz wrote: Mon Nov 23, 2020 3:14 pm If your salary is high, your net pay for a day of work in December is much lower than in January. At the beginning of the year you're filling up the standard deduction or 10/12% brackets, while at the end of the year the marginal tax rate will be higher, maybe close to 50% with state income tax. Keep that in mind if you need a reason to retire a little earlier in 2021. :happy
Not quite so. No more social security deductions. Don't forget the usual year-end bonus. For those who hate working, December is a slow month with many holidays. Your dream month. :wink:
02nz
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Re: When to retire - early, mid, end of year

Post by 02nz »

MathIsMyWayr wrote: Mon Nov 23, 2020 3:20 pm
02nz wrote: Mon Nov 23, 2020 3:14 pm If your salary is high, your net pay for a day of work in December is much lower than in January. At the beginning of the year you're filling up the standard deduction or 10/12% brackets, while at the end of the year the marginal tax rate will be higher, maybe close to 50% with state income tax. Keep that in mind if you need a reason to retire a little earlier in 2021. :happy
Not quite so. No more social security deductions. Don't forget the usual year-end bonus. For those who hate working, December is a slow month with many holidays. Your dream month. :wink:
So collect this year's bonus and retire early next year. Even with no SS tax at the end of the year, someone in the higher tax brackets will make a lot more in January than in December. Not to mention the opportunity to get in another year's contributions into 401k and IRA (although the latter may not matter if OP has enough other earned income).
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beernutz
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Re: When to retire - early, mid, end of year

Post by beernutz »

MathIsMyWayr wrote: Mon Nov 23, 2020 3:07 pm
beernutz wrote: Mon Nov 23, 2020 2:26 pm I feel you as I'd planned to work to 2023 when I was 64 but I've decided life's too short so I'm moving that date up to June 2021 and 62.

When to retire was easy for me as I'm a 9 month faculty being paid over 12 months with an October fiscal year end. If I retire in June I start my pension then but keep getting faculty salary until October. Apparently June is the most popular teacher retirement month by far for this very reason.

This probably doesn't help you but congratulations anyway!
DW is also a university faculty. Her school is on a quarter system and many quarter courses are continuation throughout an academic year which makes the timing of a professor's retirement is a little tricky. Unlike "regular" employments, they do not cut the tie with the university completely. School provides emeritus professors with some privileges such as full campus access including library use and preferred parking. Occasional office space? Her next Sabbatical is also almost up. The school, a state university, requires a full year's teaching after a sabbatical. All these imply retirement is at least 2+ years away. Professors are paid for the 9-month academic year, but they can opt for a 12-month payment schedule. If you retire in June after only 9 months of teaching, do you get a full year, i.e., 12 months of credit toward the length of service for the pension benefit?
That is an excellent question! I will ask our pension administrator. If they are taking pension contributions deductions out of those post retirement salary checks I'd better get service credit for them. - EDIT - I called them and I'm given service credit for 9 months through June and because my salary is prorated over 12 months so is the pension deduction. Thanks for asking the question though because I had a great chat with the pension rep who gave me some very valuable suggestions.

I don't care at all about emertius status, nor seemingly do any of my retired former colleagues who have it. It seems mostly a status thing and not something providing usable benefits. I haven't been in our library in almost a decade and the last time was because I was chair of the University Library committee and we met there.
Last edited by beernutz on Mon Nov 23, 2020 3:51 pm, edited 2 times in total.
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lakpr
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Re: When to retire - early, mid, end of year

Post by lakpr »

I would suggest to retire in the new year until you earned enough to max out the retirement plans for 2021: $19,500 for self and $7000 for Roth IRA and another $7000 for spouse. Note that if you make the retirement contribution to the workplace plan on a Roth basis in the new year, the amount can just be $19,500. That would not reduce the W2 income, and therefore can be used to fund the two Roth IRAs.

Plus the SS taxes and state taxes, of course. Say another $4000 to be safe.

Edit: Noticed that 02nz mentioned this point already. Consider this post as a +1 to his view.
MathIsMyWayr
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Re: When to retire - early, mid, end of year

Post by MathIsMyWayr »

lakpr wrote: Mon Nov 23, 2020 3:42 pm I would suggest to retire in the new year until you earned enough to max out the retirement plans for 2021: $19,500 for self and $7000 fir Roth IRA and another $6000 or $7000 for spouse. Note that if you make the retirement contribution to the workplace plan on a Roth basis, the amount can just be $19,500. That would not reduce the W2 income, and therefore can be used to fund the two Roth IRAs.

Plus the SS taxes and state taxes, of course. Say another $4000 to be safe.
It may sound foreign to you, but there is also an age 50 and over catch-up contribution of $6,500 with a total employee contribution of $26,000. :wink: If the plan allows after-tax contribution, your total contribution will be around $52,000 with a room left for an employer matching. The retirement date may be dragged out to somewhere in the middle of the new year. Year-end bonus is getting close.
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D Newton
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Re: When to retire - early, mid, end of year

Post by D Newton »

Thanks for the replies everyone. I dont have a pension; wife and I were faithful contributors to 401K. Plan to use Cobra until 65 then medicare. We'll have to fund wife healthcare for a few years. I live near Philly too...I like the idea of April timeframe when weather improves... bonuses, however, if any, for 2020 will be in early March so I plan to stay till then (I and company had a very good year considering...). Will take SS at FRA (66). Based on above, I think a good strategy is to retire in early part of month, regardless of what month it is. I also want to provide smooth transition and provide sufficient notice for others to take over my accounts/projects. Early June looks to be a good time... :sharebeer

Thanks again.
Regards, | Doug
MJS
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Re: When to retire - early, mid, end of year

Post by MJS »

Do you plan to do Roth conversions? Keeping taxable income low for couple years before the IRMAA cliff at age 63 can be useful.
beernutz wrote: Mon Nov 23, 2020 3:27 pm I don't care at all about emertius status, nor seemingly do any of my retired former colleagues who have it. It seems mostly a status thing and not something providing usable benefits. I haven't been in our library in almost a decade and the last time was because I was chair of the University Library committee and we met there.
Emeritus status gives me free online access to current & back issues of The Economist, Wall Street Journal, Fortune, NYTimes, and other publications. For my archeology hobby (ie, armchair), I can search & read books and journals online. For Covid & other medical questions, having access to real articles, not just magazine versions, has been quite comforting. Why, indeed, should you go to the library when it comes to you for free?
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beernutz
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Re: When to retire - early, mid, end of year

Post by beernutz »

MJS wrote: Mon Nov 23, 2020 4:45 pm Do you plan to do Roth conversions? Keeping taxable income low for couple years before the IRMAA cliff at age 63 can be useful.
beernutz wrote: Mon Nov 23, 2020 3:27 pm I don't care at all about emertius status, nor seemingly do any of my retired former colleagues who have it. It seems mostly a status thing and not something providing usable benefits. I haven't been in our library in almost a decade and the last time was because I was chair of the University Library committee and we met there.
Emeritus status gives me free online access to current & back issues of The Economist, Wall Street Journal, Fortune, NYTimes, and other publications. For my archeology hobby (ie, armchair), I can search & read books and journals online. For Covid & other medical questions, having access to real articles, not just magazine versions, has been quite comforting. Why, indeed, should you go to the library when it comes to you for free?
That is nice benefit for you but unfortunately we aren't offered that advantage. One of our benefits is 'May serve by invitation on various university related committees'--yeah, sign me up for that! We get library access (already don't use it), ability to buy a parking permit (no thanks), keep my University email account (whoop te do), and can continue to pay to use the rec center which I don't use now even though I pay for it.
All of these get a hard pass.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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JoeRetire
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Re: When to retire - early, mid, end of year

Post by JoeRetire »

D Newton wrote: Mon Nov 23, 2020 4:42 pmWill take SS at FRA (66).
Play around with https://opensocialsecurity.com/ before you decide.
Early June looks to be a good time...
If you are financially and emotionally ready, any time is a good time.

Enjoy!
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lakpr
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Re: When to retire - early, mid, end of year

Post by lakpr »

MathIsMyWayr wrote: Mon Nov 23, 2020 3:51 pm It may sound foreign to you, but there is also an age 50 and over catch-up contribution of $6,500 with a total employee contribution of $26,000. :wink: If the plan allows after-tax contribution, your total contribution will be around $52,000 with a room left for an employer matching. The retirement date may be dragged out to somewhere in the middle of the new year. Year-end bonus is getting close.
How did I forget that ! :oops: I turned 50 this year and increased the contribution to $26k myself !!

In any case, the OP said he set the retirement date to early June, so it should be possible to earn $40k at least by then, and can max out the 401k + two Roth IRAs.
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Peter Foley
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Re: When to retire - early, mid, end of year

Post by Peter Foley »

My approach was to retire in the Spring after maxing out my retirement savings accounts for the year. I was trying to create a low tax year to allow for Roth conversions. Roths came along too late for me to take much advantage of them so that was a consideration for me and may not be applicable to the OP.
Marseille07
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Re: When to retire - early, mid, end of year

Post by Marseille07 »

End of year would give you a cleaner separation of working years vs retirement years, as you file in April of next year and that's pretty much it.
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Re: When to retire - early, mid, end of year

Post by random_walker_77 »

I agree that it's better to retire near the beginning of the month than at the end of any given month. Health care typically will go through the end of the month, so you might as well get an extra month of it.

Your marginal tax rate is higher in December than in January. Oftentimes, your marginal tax rate in January can be 0, between 401k/HSA and standard tax deductions. So while you might only get to keep 75% of December's paycheck, you get to keep all of January's if it's all going into a 401k. If there are any cliff events, such as bonuses, or vesting of equity, that's worth taking into account.

Possibly less importantly, June 1st is also nice since 18 months of Cobra will take you through to Jan 1 of a new year. Assuming that medicare start dates aren't within 18 months, it's nice to switch to ACA on Jan 1 so that annual medical deductibles are all paid towards a single insurance plan.
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Re: When to retire - early, mid, end of year

Post by minesweep »

I was offered an early retirement package back in November of 2000. I was given the option of retiring on December 1 or January 1 of the new year. For tax purposes I chose the new year. Along with accumulated vacation pay there were bonus dollars given for the number of years that I worked at the company. I was able to make a Roth IRA contribution in 2001 and I believe a 401k deduction came out of that final check (it’s been 20 years – my memory is a bit fuzzy). I do remember that the maximum Roth IRA contribution at the time was only $2,000.
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JoeRetire
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Re: When to retire - early, mid, end of year

Post by JoeRetire »

Marseille07 wrote: Mon Nov 23, 2020 5:47 pm End of year would give you a cleaner separation of working years vs retirement years, as you file in April of next year and that's pretty much it.
I don't understand this. "Cleaner separation"? Where is the value in that?
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MathIsMyWayr
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Re: When to retire - early, mid, end of year

Post by MathIsMyWayr »

beernutz wrote: Mon Nov 23, 2020 3:27 pm
MathIsMyWayr wrote: Mon Nov 23, 2020 3:07 pm
beernutz wrote: Mon Nov 23, 2020 2:26 pm I feel you as I'd planned to work to 2023 when I was 64 but I've decided life's too short so I'm moving that date up to June 2021 and 62.

When to retire was easy for me as I'm a 9 month faculty being paid over 12 months with an October fiscal year end. If I retire in June I start my pension then but keep getting faculty salary until October. Apparently June is the most popular teacher retirement month by far for this very reason.

This probably doesn't help you but congratulations anyway!
DW is also a university faculty. Her school is on a quarter system and many quarter courses are continuation throughout an academic year which makes the timing of a professor's retirement is a little tricky. Unlike "regular" employments, they do not cut the tie with the university completely. School provides emeritus professors with some privileges such as full campus access including library use and preferred parking. Occasional office space? Her next Sabbatical is also almost up. The school, a state university, requires a full year's teaching after a sabbatical. All these imply retirement is at least 2+ years away. Professors are paid for the 9-month academic year, but they can opt for a 12-month payment schedule. If you retire in June after only 9 months of teaching, do you get a full year, i.e., 12 months of credit toward the length of service for the pension benefit?
That is an excellent question! I will ask our pension administrator. If they are taking pension contributions deductions out of those post retirement salary checks I'd better get service credit for them. - EDIT - I called them and I'm given service credit for 9 months through June and because my salary is prorated over 12 months so is the pension deduction. Thanks for asking the question though because I had a great chat with the pension rep who gave me some very valuable suggestions.
No deductions for pension contribution and no service credit for the last 3 months, Jul/Aug/Sep? If so and your last pay is among the 3 or 5 highest at your time at the university, it may be not for the best scenario for you. If your last pay is $120,000, will the university consider only $90,000 as your last pay when calculating your pension?
I am not sure whether applicable to you or not, but if you opt for 9 monthly pay checks per year instead of 12, Oct-Jun, and retire in June, will you get a full year's pension credit for a full year's pension deduction?
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beernutz
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Re: When to retire - early, mid, end of year

Post by beernutz »

MathIsMyWayr wrote: Mon Nov 23, 2020 9:50 pm
beernutz wrote: Mon Nov 23, 2020 3:27 pm
MathIsMyWayr wrote: Mon Nov 23, 2020 3:07 pm
beernutz wrote: Mon Nov 23, 2020 2:26 pm I feel you as I'd planned to work to 2023 when I was 64 but I've decided life's too short so I'm moving that date up to June 2021 and 62.

When to retire was easy for me as I'm a 9 month faculty being paid over 12 months with an October fiscal year end. If I retire in June I start my pension then but keep getting faculty salary until October. Apparently June is the most popular teacher retirement month by far for this very reason.

This probably doesn't help you but congratulations anyway!
DW is also a university faculty. Her school is on a quarter system and many quarter courses are continuation throughout an academic year which makes the timing of a professor's retirement is a little tricky. Unlike "regular" employments, they do not cut the tie with the university completely. School provides emeritus professors with some privileges such as full campus access including library use and preferred parking. Occasional office space? Her next Sabbatical is also almost up. The school, a state university, requires a full year's teaching after a sabbatical. All these imply retirement is at least 2+ years away. Professors are paid for the 9-month academic year, but they can opt for a 12-month payment schedule. If you retire in June after only 9 months of teaching, do you get a full year, i.e., 12 months of credit toward the length of service for the pension benefit?
That is an excellent question! I will ask our pension administrator. If they are taking pension contributions deductions out of those post retirement salary checks I'd better get service credit for them. - EDIT - I called them and I'm given service credit for 9 months through June and because my salary is prorated over 12 months so is the pension deduction. Thanks for asking the question though because I had a great chat with the pension rep who gave me some very valuable suggestions.
No deductions for pension contribution and no service credit for the last 3 months, Jul/Aug/Sep? If so and your last pay is among the 3 or 5 highest at your time at the university, it may be not for the best scenario for you. If your last pay is $120,000, will the university consider only $90,000 as your last pay when calculating your pension?
I am not sure whether applicable to you or not, but if you opt for 9 monthly pay checks per year instead of 12, Oct-Jun, and retire in June, will you get a full year's pension credit for a full year's pension deduction?
My nine months of deductions for nine months of service credits are spread out over twelve months.

I appreciate your concern but I will be fine. I confirmed with a retirement system rep today that they will use my 3 highest earning years of the last 10 to calculate my pension and that the month you choose to retire in won't appreciably matter. They aren't, to address your hypothetical, going to use 3/4ths of a year as part of that calculation.
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bluesky50
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Re: When to retire - early, mid, end of year

Post by bluesky50 »

I have been thinking about this a lot as I plan to retire next year.


Besides not missing out big bonuses you deserve, one good time might be when you max out 2021 work place retirement contribution $64,500 (401k + employer match + maga backdoor Roth), max out social security tax (income $142,800 +), and MAGI is still low enough to contribute yours and your spouse Roth IRA.

Also first day or first week of month so you can get the insurance coverage of that month.
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Re: When to retire - early, mid, end of year

Post by carolinaman »

I retired at the end of year because I got a payout of sick leave and vacation totaling 6 months pay. That would have put me in a higher tax bracket if I had done it earlier. Unless there is some financial incentive (delay to get bonus or added vacation pay), I donot think it matters what time of year to retire.
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gatorking
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Re: When to retire - early, mid, end of year

Post by gatorking »

You might want to increase your 401k contribution during the first half of the year to meet the IRS max and also to capture as much employer matching as possible.
IowaFarmBoy
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Re: When to retire - early, mid, end of year

Post by IowaFarmBoy »

For me, the timing was driven by two things: I wanted to retire near the beginning of the summer so I could enjoy it. I really didn't want to quit just as winter was coming on. I didn't think I would do well with that. The second thing was looking at the company benefits- the main one being that I wanted to make it to 62 to get full pension. Ours reduced quite a bit prior to that age and I didn't want to leave that on the table. Beyond that, I would look at things like bonus payouts, 401k matches, etc., that are specific to your company and possible tax implications from them.
backpacker61
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Re: When to retire - early, mid, end of year

Post by backpacker61 »

In your Social Security table of years with earning entries, how would 2021 rate relative to the other years of earnings you have?

Would it displace another year of lower earnings if you worked the full year? By how much?
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aristotelian
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Re: When to retire - early, mid, end of year

Post by aristotelian »

My thinking is to retire at the end of the year so that I will be able to make the most of my standard deduction and low tax bracket the following year. Probably doesn't matter though.

I plan to claim SS at 70 if I don't run out of money first, so I don't see that as a major consideration.
leftcoaster
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Re: When to retire - early, mid, end of year

Post by leftcoaster »

I’m approaching it as...

(Not before age where I can ride COBRA to 55 and gain access to retiree health)

Bonus should clear (October)

RSUs should vest (April, October)

ESPP should pay out (January, July)

Enough income to get a high earning year on the books for social security (April)

Enough income to fund 401(k) and IRA plans, maybe NQDC (April+)

Edit to add: I keep more of what I make early in the year.

And, since a man only has so many summers, April is looking good!
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Watty
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Re: When to retire - early, mid, end of year

Post by Watty »

One thing that has not been mentioned is that retiring could reduce your exposure to COVID while on the job. It sounds like it could get a lot worse over the next few months.

If you are financially comfortable now it might make sense to retire now.
tibbitts
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Re: When to retire - early, mid, end of year

Post by tibbitts »

JoeRetire wrote: Mon Nov 23, 2020 9:29 pm
Marseille07 wrote: Mon Nov 23, 2020 5:47 pm End of year would give you a cleaner separation of working years vs retirement years, as you file in April of next year and that's pretty much it.
I don't understand this. "Cleaner separation"? Where is the value in that?
I agree this makes no sense. It's better to retire early in the year - another year of Roth contributions, and no income tax on your earnings. Not to mention that for many organizations, the "end of the year" isn't the end of the calendar year. Also you may get additional money for your Flex account, if that matters.

So of course I retired in December last year. As it turned out I'm glad I did, for two reasons: the pandemic (I got in a couple of months of activities I probably won't be able to do again until 2022 or 2023, if then), and not wanting to stay beyond my usefulness at my job.
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beernutz
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Re: When to retire - early, mid, end of year

Post by beernutz »

gatorking wrote: Tue Nov 24, 2020 7:59 am You might want to increase your 401k contribution during the first half of the year to meet the IRS max and also to capture as much employer matching as possible.
+1

My wife found out in late 2018 that her corporate employer was considering a buyout which, if it happened and if she was accepted, would occur at the end of May 2019.

Just in case she decided to apply and was accepted, we doubled the size of her 401k deductions starting in January 2019. As it turned out, she was accepted and took the buyout but she ended up making 10 months worth of 401k deductions in those first 5 months of 2019. Given the appreciation on that account, that decision added an additional $10k to her current 401k balance over and above the contributions she made.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
Colorado13
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Re: When to retire - early, mid, end of year

Post by Colorado13 »

Duplicate post
Last edited by Colorado13 on Tue Nov 24, 2020 4:35 pm, edited 1 time in total.
Paul78
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Re: When to retire - early, mid, end of year

Post by Paul78 »

I would say tax wise early in year right after you made enough to max out your 401k and ira. So could be two weeks or 6 months depending on how much you are making. But tax wise that plan would make the most sense to me.
Colorado13
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Re: When to retire - early, mid, end of year

Post by Colorado13 »

Piggybacking on previous posters' plans... My tentative plan is to retire somewhat early in the year, after I contribute the maximum allowed to my 401(k). I'll have a few months of nearly $0 salary because I plan to defer it all to the retirement account. I want to earn enough income to get SSA credit for the year; that amount is $26,550 in 2021.

Congratulations!
likegarden
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Re: When to retire - early, mid, end of year

Post by likegarden »

I retired when suddenly one evening on my drive home I could not look through my right eye. I had to turn my head partially to see both sides of the road. I had it, I was all stressed out, and I was at the right age of 62 1/2 years old, younger people were placed to do part of my work, so I did not even ask my doctor to give me some pills. I quit, gave the company 3 weeks, and was then retired, got a company pension and waited with SS until 65. And now I am close to 81. healthy, stress-free, enjoy my life!
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