What Is The Best Time Of Year To Retire


If You’re About To Stop Working And Enter Your Golden Years Here’s A Look At Important Personal Finance Topics To Learn About Such As Social Security Benefits

When is the Best Time for Federal Employees to Retire?

Many of us look forward to it for decades — retirement! Work can be pleasant or even fun, but it’s exciting to think of when we can stop working and enter our golden years, perhaps even achieving an early retirement, if we made smart personal finance decisions and met our retirement goals.

If your retirement is here or around the corner, you need to read up on a bunch of retirement-related topics, so that you can make smart moves that keep costs down and let your nest egg last as long as possible.

The following topics are covered below:

  • Healthcare costs: Know how much to expect and how to save for it
  • Inflation: Learn how to manage how far your money will go, over time
  • Social Security: Know how much to expect, how to decide when to take it, and how to increase benefits and avoid reductions
  • The best-case scenario: You have enough saved to retire
  • The medium-case scenario: You have nearly enough saved to retire
  • The worst-case scenario: You don’t have enough saved to retire
  • Annuities
  • Taxes in retirement: What you need to plan for and how to minimize taxes
  • The non-financial side of retirement
  • Seeking professional help

Federal Employee Retirement System

Congress created the Federal Employees Retirement System in 1986, and it became effective on January 1, 1987. Since that time, new Federal civilian employees who have retirement coverage are covered by FERS.

FERS is a retirement plan that provides benefits from three different sources: a Basic Benefit Plan, Social Security and the Thrift Savings Plan . Two of the three parts of FERS can go with you to your next job if you leave the Federal Government before retirement. The Basic Benefit and Social Security parts of FERS require you to pay your share each pay period. Your agency withholds the cost of the Basic Benefit and Social Security from your pay as payroll deductions. Your agency pays its part too. Then, after you retire, you receive annuity payments each month for the rest of your life.

The TSP part of FERS is an account that your agency automatically sets up for you. Each pay period your agency deposits into your account amount equal to 1% of the basic pay you earn for the pay period. You can also make your own contributions to your TSP account and your agency will also make an additional matching contribution up to 4%. These contributions are tax-deferred. The Thrift Savings Plan is administered by the Federal Retirement Thrift Investment Board.

Service Requirements for Unreduced Benefits

*minimum 5 years of creditable civilian service is required

Service Requirement for Reduced Benefits

  • 10 years of creditable svc and retire at MRA
  • Permanent reduction in annuity

How To Retire At 65

Most people realistically expect to retire at 65. Medicare benefits begin at 65, and after that age there are no penalties for early withdrawals from retirement accounts.

Just as with all stages of retirement, you’ll have some big decisions to make. Consider your health plan: If you are enrolled in Medicare, will it cover all your needs? You might want to think about potential long-term care expenses and how to handle future cognitive declines. Look into different types of supplemental healthcare policies.

Be advised that the full retirement age for your Social Security benefits is 66 or later, not 65. For most people, this means that even if you retire at 65, you’ll be better off waiting a year or so before beginning your Social Security benefits.

At all ages of retirement, you’ll need a “decumulation” plan for how you will withdraw from different accounts, in what order, and by how much. Reassess often.

Recommended Reading: Can You Retire At 55 With 1 Million Dollars

Free Tool To Help You Retire

If you want to retire early, I suggest signing up with Personal Capital. PC is a free online tool Ive used since I retired in 2012. Before Personal Capital, I had to log into eight different systems to track 35 different accounts. Now I can just log into Personal Capital to see how my stock accounts are doing. I can easily track my net worth and spending as well.

Personal Capitals 401 Fee Analyzer tool is saving me over $1,700 a year in fees. Finally, there is a fantastic Retirement Planning Calculator to help you manage your financial future. I frequently use the Retirement Planner as a coach to keep me on track. Theres no better free tool on the market.

Filed Under: Retirement

I started Financial Samurai in 2009 to help people achieve financial freedom sooner, rather than later. Financial Samurai is now one of the largest independently run personal finance sites with 1 million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children. In June 2022, Ill be publishing a new book entitled, Buy This, Not That Spending Your Way To Financial Freedom.

Current Recommendations:

Retirement Rules: Why 65

When Is the Best Time of Year to Retire?

Age 65 has long been considered a typical retirement age, in part because of rules around Social Security benefits. In 1940, when the Social Security program began, workers could receive unreduced retirement benefits beginning at age 65.

From 1983 to 2000, the rules changed to gradually increase the Social Security full retirement age to 67. Currently, the Social Security full retirement age is 66 for those born between 1943 and 1959, and 67 for anyone born 1960 or later.

And the Social Security age requirement is not the only thing that’s changed. In 1940, anyone retiring at age 65 would spend, on average, around a dozen years in retirement.

Today, because of improvements in health care, that number has increasedand will likely continue to increase. So it’s important to factor this trend into your retirement plans.

Tip: Looking for estimates? Start visualizing retirement with your own info by visiting our planning tools and calculators.

Watch: How one woman found a new normal after leaving her long-time job.

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When Should You Retire

When to retire is a personal decision. You will need to weigh your preferences, your finances, your health and your family needs in deciding whats best for you. Retiring young is intriguing for many, but waiting until your late 60s or early 70s has its benefits.

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The dream for many workers is to retire young and live a life of leisure, enjoying the fruits of a career and working through a bucket list, or relaxing by the beach.

But financial and health considerations may make that dream unachievable for many Americans. And others prefer to keep working as long as possible because they enjoy the feeling of productivity and a sense of identity through their careers.

The decision is ultimately up to you, but there are important factors to consider about your physical and financial health when deciding what age to retire.

How To Retire At 70

If you’re still working at 70, you may be the type who never wants to retire. Plenty of people continue working in their golden years, simply because they can, and they prefer to stay active.

If you do want to retire at 70, the good news is that you’ll get the maximum amount of Social Security benefits by waiting until you’re 70 to start payments.

There’s more good news: Like wine, some retirement products get better with age. Annuities and reverse mortgages are two products that are more attractive in your later years, because a reduced time frame works in your favor when calculating costs and interest rates.

From age 70, you’ll also need to keep in mind the minimum distribution limits on your retirement accounts. Many plans require withdrawals by 72 for those who turned 70 1/2 after December 31, 2019. If you miss these, there is a hefty penalty, so make sure you start them on time.

Lastly, although it applies to people of all ages, when you’re in your 70s , you should make sure that all your affairs are in order: If you haven’t done so yet, review all of your accounts and policies for beneficiary designations, create an advanced directive, and take care of estate planning.

Read Also: Luxury Retirement Communities In Texas

While You Or Your Spouse Is Pregnant

One of the best benefits of work is parental leave. Obviously, some companies are more generous than others. The time to retire early is not while you or your spouse is pregnant. The time to retire early is after youve taken full advantage of your companys parental leave policy.

At many of the top firms, employees get three months of paid leave a year or more. Therefore, take three months of paid leave, come back for several months, and then retire.

I dont recommend giving your notice the week after fully exhausting your parental leave. If you do, youll create bitter colleagues and burn bridges.

Its much better to come back to work for at least three months and see how things are. You might love taking a vacation from childcare by going back to work. And you might also find work to be much more meaningful once you have children.

If you plan to have multiple babies, then consider retiring after you have your last child. One of my former colleagues had three babies within five years. She was able to take off nine months plus all her vacation days. She still got promoted to Managing Director and is making big bucks.

What we did:

My wife and I got zero parental leave benefits because we had our children 2-7 years after retiring. If we did have a baby while working, I think at least one of us would have tried to negotiate a severance within 12 months of birth.

Inflation Is Through The Roof

How I Retired Early At 37 With $1.2 Million In California

Perhaps the number one reason I would reconsider retirement in 2022 is high inflation.

For the 10th month in a row, inflation has stayed above the Bank of Canadas 1-3% targeted rate. And it doesnt look like its going down anytime soon. Yes, the Bank of Canada has a plan to bring inflation back to pre-pandemic levels. But with the way things are looking, I doubt theyll curb it in 2022.

High inflation doesnt have to stop you from retiring. After all, you might have enough retirement savings to take on a slightly higher cost of living. But for those whose budgets are tight, I would play it safe and postpone retirement until at least 2023.

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Learn More About Federal Employee Retirement As You Plan To Leave Service

If youre preparing to retire this month or sometime in the next year, make sure you know everything you need to know about federal employee retirement planning.

MyFEDBenefits has a team of local benefits specialists across the country. Find a specialist near you who can review your benefits and make sure youre getting the coverage you need.

Finding the best day to retire is just the first step. Making sure you are financially prepared for the next 10, 20, and even 30 years is the goal for retiring into a healthy, happy life. Find out if you are ready to retire by contacting MyFEDBenefits today to schedule your free retirement review.

Does Delaying Retirement By A Year Really Make A Big Difference

Yes. Delaying retirement by a year can be meaningful. But, the reality is entirely dependent on your personal situation. Without counting appreciation on the additional savings, here is how it adds up:

Social Security: A year could mean a $0$500,000 difference. Lets take the modest example and say it costs you $50,000


Work Income: $50,000+

Work Benefits: $16,500

Delayed Savings Withdrawals: $8,000+

Savings Contributions: $33,000

Your Time: As the TV commercial used to say, PRICELESS

There is a huge range for what delaying your retirement for just one year might cost you but it is safe to say that $100$200 thousand is a conservative estimate , except that your time really is priceless. At a minimum, it has some value to you that should offset whatever you might gain from working longer.

Use the NewRetirement Planner to run scenarios for what delaying retirement a year or moving it up five years might mean to you. Just remember to balance the financial side of the equation with how you really want to be spending time.

Recommended Reading: How Much Money Does The Average Person Need To Retire

Cautions On Early Retirement

Finances aside, there may be reasons to rethink retiring at 50. If you’ve always been a career-oriented person, a “type A” personality, or an over-achiever, and you have the funds to sustain an early retirement, you may want to think twice before retiring. You may find retirement enjoyable for a few months, but without a new project to work on, too much leisure time may become boring for you. Business owners and working professionals are those who are most likely to get bored in retirement.

Another thing to think about is your long-term health. In middle age, you may be vibrant and healthy, but in a few decades things might change. To have a successful early retirement, you should assume that your health needs and medical expenses will increase. To retire at 50, you need to account for the fact that your funds may need to cover 40 years of living expenses that won’t look the same as your current situation.

If your retirement fund has sufficient assets, and you wish to take money out without paying an early-withdrawal penalty, you may be able to set up 72 payments. This option allows you to access your retirement savings at any age without paying the early-withdrawal penalty.

Early Retirement: Before Age 65

The best way to save for retirement

Let’s be honest, leaving your job can have some nice perks. By the time some workers reach their 50s and early 60s, they’re starting to feel burned out, so retiring before the traditional age of 65 can feel invigorating. Men retire at an average age of 64.6 years, while for women, the average retirement age is 62.3 years. So whether it’s traveling, taking up new hobbies, or simply finding a part-time job with less stress, it’s your opportunity to recharge.

While there is research to show that working longer keeps you healthier and happier, there’s also evidence for the opposing view. The National Bureau of Economic Research, for example, found that “retirement improves both health and life satisfaction,” in part by factoring in the number of people who are forced to retire due to health issues. However, there’s a major caveat here. Relatively few people have the financial resources to support an extended retirement.

Read Also: Ways To Save For Retirement Besides 401k

Will You Have To Take Required Minimum Distributions

Beginning in January 2020, the SECURE Act pushed the age at which individuals are required to begin withdrawing money from their retirement accounts back from 70.5 to 72. Additionally, the law allows working individuals to continue to contribute to their traditional IRAs past the age of 70.5.

Due to the coronavirus-relief CARES Act, required minimum distributions were suspended for 2020, allowing individuals to defer taking distributions from retirement accounts if desired. Did you take RMDs in 2020? You may be able to return those funds to your IRA and push any further distributions into this year.

Negotiating My Current Job Duties

  • Likelihood of occurring: 5/10
  • Desirably of outcome: 10/10

Instead of chasing a unicorn job, what if I tried to make a unicorn job. As I have said before, I like my job. Im just not crazy about the following things:

  • Supervisory duties
  • Full time work.

In my mind, working part time in my current job is everything I want .

If I were able to achieve these changes, Id get to keep FEHB and all of the parts of my job I love especially the awesome workplace culture we have. Furthermore, Id moderate some of the unpleasant aspects of my job and add more time to work on passion projects.

In my mind, this is everything I want .

Now- the big questions is whether I can pull it off. I think if I were confident in having enough FU money, I could ask for this knowing I could walk away if it didnt work the way I want it to.

However, even at > 80% of the way to full financial independence, Ive thought about asking to work part time and chickened out. Im not sure Ill ever have the confidence to do this.

Read Also: Retiring In Mexico Pros And Cons

Picking The Best Date To Retire

Here it is, mid-September. And those of you who have the right amount of age and service are asking, Whats the best date to retire? While there is no single best date to retire sorry about that! some dates are better than others. Let me explain.

Time of Month

The time of month thats best to retire is different for CSRS and FERS. If you are a FERS employee, you have to retire no later than the last day of a month if you want to be on the annuity roll in the following month, If you are a CSRS employee, you can retire up to the third day of any month and be on the annuity roll in the same month. However, your annuity payment for that month will be reduced by 1/30th for every day you arent on the annuity roll.

Clearly, picking the wrong date by as little as one day can affect your annuity. If you are a FERS employee who retires on January 1 instead of December 31, you wont be on the annuity roll until February 1, and you wont receive your first months annuity payment until March 1. The same delay applies if you are a CSRS employee who retires on January 4 instead of January 3.


Unused Annual Leave

You have a limit on how many hours of annual leave you can carry over from one leave year to the next. For most employees, thats 240 hours. So, if you have a lot of use or lose leave, theres an incentive for you to retire before those hours are lost. Thats because youll receive a lump sum payment for any unused annual leave.


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