How to Pick Your Retirement Date

Happy 4th of July! It’s around this time every year that many folks retire. A lot of people like the symmetry of June 30th being their last working day or the July 4th holiday being their personal independence day. Milestones are a great way to mark major life changes, but there are some important points to keep in mind when picking your retirement date.

Retirement Plan – Read your retirement plan document six months to one year prior to when you are considering retirement. You want to be aware of any dates that will work to your favor such as when payouts for matching contributions are made, confirm your vesting schedule, and know until which dates you may need to be actively employed to receive plan contributions or benefits. If your company still has a traditional pension plan, your actual retirement date could be very important. It could add money to your monthly payout by working even a day longer. The point – whether it be a pension plan or a defined contribution plan such as a 401(k) plan, check your plan documents carefully.

Equity Compensation – If you retire today, how will your stock benefits be treated? This is important to know because it would be an unpleasant surprise to learn that you are losing out on equity benefits because you selected a holiday weekend to retire versus the end of the fiscal year, a key quarter in the equity plan or possibly calendar year-end. If you have a lot of equity compensation, confirm the treatment of the awards upon separation of service and make sure your last day at the office works in your favor.  You would not want to lose a large award grant or incur a major tax bill over selecting a retirement date that might be too early.

Social Security – Are you retiring early? Will you wait until full retirement age? It will make a huge difference in your benefit. If you retire early, generally age 62, you are not going to receive a full Social Security benefit. You need to review your Social Security statement and determine your personal full retirement age for receiving your full benefit. If you have additional resources such as savings, investments, and maybe a pension or 401(k) plan, you may be comfortable retiring early and taking a reduced benefit at age 62. You may also decide to wait and draw benefits beyond full retirement age that will increase your monthly check! Timing is important as is having a plan and knowing what you’ll be receiving at each age.  

Vacation Days – Companies handle vacation pay in different ways. Some pay it out, others have “use it or lose it” policies. The important thing is to know how your company handles accrued vacation and what is the best possible way for you to not lose out on any accrued benefit.

Health Care – Have you planned for health care? Retire too early and you may not be eligible for Medicare. Make sure you know what you are going to do regarding health care. In some cases, you may be able to extend your company plan or it may be portable. In other cases, you may need to purchase a private plan in the marketplace. If you are Medicare eligible, make sure not to miss the enrollment period.

Retirement as a concept is changing quickly in our society.  Even so, many people look forward to transitioning from a career whether it is to full retirement, partial retirement, or even into a twilight career. All of these decisions are very personal but can affect your benefits. A little advance planning can help smooth the transition and put you in the best possible position.

As an independent Certified Financial Planner™, I can help you create a plan to move forward. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #retirement #aplanforyou #newcareer #socialsecurity #medicare #independence