If you’re planning to retire by the end of the year, you may want to be strategic about the dates you choose to mark your official last day of work, particularly if you are eligible for a pension through the federal government. There are two dates coming up to keep in mind if you fall into this category. Even if you aren’t eligible for a federal pension, you still want to make sure you have a plan in place to ensure you have a smooth transition into retirement.
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Here’s what you need to know if you’re planning to retire by the end of 2024.
The Two Best Dates To Retire Before the End of 2024
If you want to retire before the end of the year, consider retiring on Nov. 30 or Dec. 31.
“Everyone’s situation is different, but retiring later in the year can boost your savings, maximize your pension income and employer benefits, and could avoid triggering the additional taxes on Social Security if your income exceeds certain thresholds,” said Steven Frith, LPL financial advisor for Golden 1 Investment Services.
“Retiring specifically on Nov. 30 also allows you to truly ‘close the door’ on your working life, giving you time to rest and recharge before embracing a well-deserved break as you head into the December holiday season,” he continued. “Financially, Dec. 31 is often considered the best day to retire, especially for those in the federal pension system, as you have the benefit of the full month of income, but your pension also starts the following day, Jan. 1.”
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How To Prepare To Retire by the End of the Year
Once you have a retirement date set, it’s important to make a plan for a smooth transition. Frith said that there are five things you should do as you approach retirement.
Know What Retirement Will Cost You
“At the most basic level, when it comes down to it, retirement is making sure you have enough money and assets to pay for your expenses,” Frith said. “Have you sat down and budgeted what those expenses are? Have you taken inventory of your assets — sources of income, savings balances, investment assets, valuable possessions that you can liquidate, etc.? Have you considered inflation on those expenses?”
If you’re unsure about the answers to any of these questions, Frith recommended speaking with a financial professional.
Know Your Retirement Package
“Every employer’s retirement package is different, and knowing those differences before you retire can be the difference between a smooth retirement or one with a bumpy — or financially detrimental — start,” Frith said.
Some things you should look into are your employer’s policy for unused PTO benefits and how soon a pension will start paying out after your official retirement date.
“Those are only a couple of examples,” Frith said. “Speaking with a financial advisor as well as any retirement-related resources your employer provides can be very helpful in navigating these waters, but be sure to do it before you retire, so you largely know what to expect.”
Build an Emergency Fund
It’s always a good idea to have three to six months’ worth of living expenses set aside in a liquid account.
“Even the most tightened up financial plan is just that — a plan,” Frith said. “Life happens, and an emergency fund can help minimize the stress or financial harm the unexpected can create.”
Square Away Your Health Coverage
Make sure you have a solid plan for healthcare coverage.
“Some employers offer to allow you to continue your coverage, some don’t,” Frith said. “If you retire earlier in life, especially before you are eligible for Medicare (65 years old), your health insurance costs could be substantial. If electing Medicare, did you already select a Medicare supplement policy?”
Manage Your Investments
Frith recommended sitting down with a financial advisor to discuss your investments ahead of your retirement date.
“When it comes to your 401(k) or other retirement savings accounts — including but not limited to 457s, IRAs, SEP IRAs, Simple IRAs, 403(b) [plans], etc. — some things change,” Frith said. “Your advisor can educate you on, for instance: Is a distribution subject to any penalties? Are your investments invested with a proper risk tolerance? Do you want to manage your investments or have someone do it for you?”
Taking these planning steps can help make your retirement as seamless as possible once you get there.
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This article originally appeared on GOBankingRates.com: These Are the Best Dates To Retire If You Want To Retire by the End of 2024
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