The time of year you retire has the potential to have a significant impact on your retirement income and tax liability. How do you choose the optimal time of year to retire?
The optimum time of year to retire will vary on your own circumstances, but there are a few crucial factors to consider before making a decision.
Pension benefits are calculated in various ways, and some plans may automatically add an extra year of service if you work even one day into the next year.
Like, if you started working on Sept. 1, 2001, you may obtain 22 years of service if you retire on Sept. 3, 2022, even though you only worked one day.
It's also important to be wary of early withdrawal penalties when withdrawing from retirement funds if you're retiring early.
To avoid paying the 10% early withdrawal penalty on your IRA, you should wait until you're at least 59.5 years old before taking money out.
You should also consider "additional" benefits. Stay long enough to collect annual bonuses and analyze how that income will affect your taxes.
Retirement can affect Social Security benefits too. If you wait until age 66 or 67 to collect Social Security, your payment will be higher.
It is also essential to keep in mind that having a substantial quantity of earned income and withdrawing from retirement savings could place you in a higher tax bracket.