What’s the Best Time of Year to Retire?
As part of your retirement planning, serious consideration needs to be given to the best time of year to retire. Not only are there financial implications, but what about the weather?
Things to think about:
- Cost of living raise. When Kathy retired at the end of August, she was informed she was not eligible for the annual cost-of-living increase. Kathy assumed she would receive the increase as part of her pension.
Action Plan: Some employee benefit programs state you must be retired on or before July 1st (meaning your last working day would be June 30) to receive any cost-of-living increase on your pension granted for July 1st. Before retiring, Kathy should have understood how cost-of-living increases work at her company. She needed to talk with her supervisor or Human Resources about how her pension may be affected.
- Vacation payoff. Susan has 40 days of accrued vacation. She is contemplating retiring but is not sure if she will lose her banked vacation days.
Action Plan: The first week of January may be appealing to begin retirement, especially if Susan is carrying more than the maximum accrual for vacation. Susan could get paid for the total if she retires before the end of the first pay period in January. Retiring in January also gives her the entire tax year to absorb that lump-sum payoff.
- Seasonal blues. Juan retired in November. Each morning Juan awakes to grey skies and rain. Juan wishes he had retired in the summer when he would be outside enjoying the sunshine.
Action Plan: Regardless of when Juan retires, it is important to plan activities to counter or coincide with the season. For example, if retiring in January, Juan may want to start with a trip to the sunny south or take a ski holiday. If Juan chooses to retire in the winter months (January – March), he may face many grey, cold, snowy days that can give the inaugural weeks a bleak feeling.
Retiring in the Spring (April – June) and the prospect of gardening and being outdoors may be appealing. Or perhaps the summer (July – September) and spending additional time at the cottage. The Fall months (October – December) may be ideal as this is a time of completion, celebration and planning for the New Year.
In Summary: When planning your retirement, decide the time of year that best suits you and your partner. It is important to choose the right time given your financial and personal needs and perspective.