Weekend Reading: Best Time Of Year To Retire Edition
When is the best time of year to retire? For retirement projections 10-20 years out we might use a random date like your birthday, your pension’s normal retirement date, or the end of the year. Once you get closer to retirement, the details matter.
For instance, you might consider timing your retirement date just after bonuses are paid. Or matching up with your spouse’s retirement date. The weather can even play a role. Golfers don’t want to retire in December or January – might as well work until spring. Avid skiers might not mind as much.
Meanwhile, teachers might want to (or have to) wait until the end of the school year in June. Snowbirds, on the other hand, might relish the idea of spending their first few months of retirement in the winter down south.
I’ll admit I’ve never paid much attention to the best time of year for retiring, but lately a few soon-to-be retired clients have made that point – they don’t want to retire in the depths of winter, or they want to wait until a lucrative bonus gets paid out.
“Mike doesn’t want to retire on December 31st. The golf courses aren’t open yet. He’d rather wait until April.”
“Bonuses are paid out at the end of February, so I’ll stick it out until March.”
That’s why I think the second quarter (April – June) might be the sweet spot for calling it quits. Bonuses are paid, the weather has warmed up, and you’ve earned a bit of income for the year, but not so much as to drive your tax rate up too high.
I haven’t given much thought to my own retirement date, but I can absolutely see myself working through winter and into the spring months. I wouldn’t wait until my birthday (August), but April/May sounds about right.
Readers, did you choose your retirement date – and how did you decide? Was it weather, money, aligning the date with your spouse? Let me know in the comments.
This Week’s Recap:
In the last Weekend Reading I updated readers about our mortgage renewal and why we decided to go with a 3-year fixed rate term.
To update this saga, TD would not match the best rates I found elsewhere and so I put on my DIY mortgage broker hat to find the best deal. I had to hurry, too, because our term is coming up at the end of the month and switching can take time.
RBC has an excellent promotion, offering 5.09% plus paying $1,100 in switch fees, $1,000 cash back, and 55,000 Avion points. I was just about to sign this offer when a reader tipped me off on an even better deal.
Pine Mortgage was able to give us 4.94% for the 3-year term, plus $3,000 in cash back. They were fast, professional, and easy to deal with. The mortgage still has generous pre-payment privileges.
We signed the paperwork Friday and got the ball rolling so we can hopefully meet our end of month deadline.
Pine is relatively unknown, but has a partnership with Wealthsimple where they’ll give clients a discount (up to 0.25%) depending on the amount of assets held with Wealthsimple.
Since we are “Generation” clients ($500k in assets) we qualified for the 0.25% discount off of their published rate of 5.19%. Note that the initial online application gave us 5.19% but we were able to negotiate that down once a Pine representative reached out.
If you’re in the market for a mortgage (new house, refinance, or term renewal) send me a message and I’ll get you in touch with the Pine Mortgage rep that I used.
Weekend Reading:
The federal government unveiled a bold new strategy designed to tackle the housing crisis from both the supply and demand side. Part of the sweeping changes includes a boost to the Home Buyers’ Plan withdrawal limit (increasing from $35,000 to $60,000).
Despite high fees, Canadians remain perplexingly loyal to mutual funds (subscribers):
“It’s officially been a century since the advent of the mutual fund, which remains the investment of choice for millions of Canadians saving for retirement.
That loyalty comes with a steep cost. The premium fees that traditional mutual funds carry are silent portfolio-killers, devouring returns on a scale that Canadians still don’t seem to appreciate.
Even the average everyday investor will pay hundreds of thousands of dollars in fees over their lifetimes if they rely on mutual funds. The baffling part is that they do so voluntarily.”
Morningstar’s Christine Benz discusses three risks higher interest rates pose to your retirement plan.
Your spending drives your retirement plan. Meaning, if you’re nearing retirement it’s time to figure out where all of your money goes.
For the DINKs out there – How Canada’s child-free and cash-rich couples are spending their time and money.
PWL Capital’s Ben Felix has interviewed some of the smartest people in finance, economics, and psychology on the Rational Reminder podcast. Here’s some of the most important investing lessons he’s learned:
One of the biggest problems people have when it comes to money is figuring out what to do with it and when. Nick Maggiulli has you covered in his latest blog post.
Want to put money away for your kids or grandkids? Mark McGrath explains the unknown dangers of In-Trust-For Accounts.
Finally, Heather & Doug Boneparth explain why allowances are for kids – not your spouse.
Have a great weekend, everyone!
I retired at the end of December. I had three reasons. I wanted to go on a warm holiday and why not escape the coldest month? I also enjoyed not having to worry about shovelling snow to get my car out of the garage to go to work. Or simply HAVING to go to work when it was -40. Staying home in front of my fireplace while others braved the winter to go to work….just seemed to make retirement even more enjoyable. I also wanted my vacation pay etc to be paid out in the new year, rather than having it added to my income for the previous year. From a tax perspective, that seemed to work out well. And I had those cold winter months to do some renovations etc, so that I was clear and free to enjoy the upcoming spring/summer without guilt of what I “should” be spending my time doing. Closing the office door for the last time on December 31st….was perfect. Staff Christmas parties etc, were a great time to say “goodbye” and welcome a new phase of life.
Hi Brenda, thanks for sharing this fantastic perspective. Makes perfect sense!
Not sure if you can access email addresses if I just post. I’m renewing by end of summer… TD will be knocking perhaps as early as july. I wouldnt mind having options.
Sent you an email, Brad!
I retired in June – bonuses were paid, severance was waiting and the weather turned warm. The downside of the severance was that the employer did not account for the new tax bracket I entered so this tax year will see me with a balance to pay Rev Can. Not the best planning on my part – I could have done a quick cacluation in Feb and contributed to my RRSP to reduce the tax burden. Hard lesson to learn.
Hi Michele, thanks for sharing. Good point to consider tax implications of not only bonus but severance as well. We can’t always time these things perfectly.
There was no science or financial considerations – It just felt like it was the right time – I thought I was done… went out on a high feeling good about my contributions (the employer liked them as well and asked me to come back – was too sweet a situation to pass up)..
Hi Geoff, thanks for your comment. You’re far from the only retiree to get lured back to work in some capacity. As long as you enjoy it, why not?!?
I find your weekly updates very informative. Thanks for doing this.
Can you provide the Pine Mortgage contact information?
It was deep in the pandemic, and my employer was threatening (again) to force us all back to the office. I was finishing up a project with a very difficult client (the one that pushed me over the edge) and wrapping up a few other ones at the same time. It was just time to go. If I’d stayed a few more months I would have earned the following year’s annual vacation days, but it was not top of mind at the time.
I retired at the end of March 2018. With my pre-retirement leave, accrued vacation and my pension, I had the same income as I had when working, so I didn’t have to draw from my investments until the next year, I chose salary continuance so that my benefits (incl. travel insurance) were in effect until August. I maxed out my drug, massage and chiropractic benefits and then, in September, started the retiree plan with their benefits, so I was able to double dip that year.
I took an early retirement package May 1st 2020. My employer was making mass layoffs due to the pandemic so I didn’t have a choice of timing but it worked out well. My 2019 bonus had been paid and severance carried me through until almost the end of the year. Plus I was qualified to split my workplace pension with my spouse so I didn’t wind up in a higher tax bracket either. The biggest downside was not being able to use up my company medical benefits. Everyone has different circumstances but for reasons you laid out Rob, retiring in Q2 seems to be the optimum time.
Often, Robb, when friends and colleagues have told me that they plan to retire at year’s end, I ask them to consider carrying on working into the new year until they have earned enough to max out their normal personal deductions and tax credits. Why not have one year in your working life that is actually tax-free? Plus, it puts you that much closer to nicer weather.
I retired the week your analysis told me I could, Robb 😉
I’ll always remember the first line of your report: “Jason, it’s time to draft and submit your letter of resignation.” I’m forever grateful to you for helping me cross the finish line.
I retired after the first week of January. My Health Spending Account , around $5000, was fully funded for the year on January 1st. I used the money for some dental work that wasn’t covered under my benefit plan.
My employer was offering a retirement incentive bonus. There were some calculations to be done, i.e. when to get the bonus vs earning more salary. It actually worked out that if I retired at an earlier date I would receive more cash. Retirement date ended up being in June. Now that I’m retired, any suggestions as to ETFs that pay a monthly dividend?
I retired on June 30. I had just made the maximum CPP contributions for the year, was about to be put on a project that didn’t particularly appeal to me, and had the summer to look forward to. The financial planner at my bank had told me not long before that I would never run out of money, so it was an easy decision.
I retired at the end of January, quite a few years ago. I did not want to miss a few months in the South. I never regretted retiring, just wish I could have done it earlier. I sold all my funds and became a DIYer because I noticed my financial salesman did not know anymore than I did about investing. I am still amazed at how much my portfolio has grown since I stopped paying high fees.
Well-done Angelo. I did the same thing. I retired and became a DIYer handling my and my wife’s
investment accounts.
I decided to take my retirement when the company that I worked for was bought out by a fund
management company. The same company also bought out the previous company I worked for.
The decision to take the retirement was not difficult as my wife had taken her retirement one
month earlier.
I managed to work out a decent severance package and had the company’s fund administrators
transfer my group RRSP and the funds from the severance at ‘Arm’s Length’ to my Self Directed
Retirement/Investment account at another financial institution thus avoiding paying any tax.
Retirement date came in the Spring ,10 years ago. So far so good and enjoying our time watching the grandkids grow.
Bonuses were paid out Feb. 28th and I retired March 1st, still feels like I’m working as haven’t had time to get into retirement mode as yet. Im working on it , vacationing in Costa Rica with my kids and grandkids at the moment unplanned trip, airfare was a steal. It’s been wonderful here, the restaurants are top notch but unfortunately homeward bound in two days. Then, still have lots of paperwork to get to, CPP and OAS applications..Pickle ball and workouts to fill time!
Hi Robb – Thanks for what you do, it’s been of great benefit over the years. I need to renew in August. Options are good, so would you mind passing along your contact at Pine Mortgage?
Thanks for all the information you cover in this blog. I am hoping that you will comment on the changes in the capital gains tax in the recent budget.
Might it be wise to crystallize the capital gains on investment properties or recreational properties before the June 2024 deadline when the new 66.67% kicks in?
Is it even possible to crystalize capital gains without selling the property?
How do these changes affect holding property in a trust vs as an individual? We have been told Joint Partner Trusts are a great idea to avoid probate taxes upon death but it seems that the increase in capital gains tax incurred by holding the property in a trust wipes out any advantage regarding probate. According to my calculations capital gains tax on $250,000 as an individual would be about $62,500 but a trust would pay $83,337 a difference of $20,837. If the property is held jointly with a spouse those numbers would be doubled as both individuals would qualify for the first $250,000 capital gain at 50% instead of the 66.67% in a trust. Am I missing something? I realize that any amount over the $250,000 threshold is taxed at 66.67% regardless of whether it is held as an individual or held in a trust.
Hi Robb, I really like your blog.
My partner retired December 31st 2023 and I retired in early January of this year – and while I agree the time of year isn’t the best, we took advantage of our new found freedom to head off to Aruba and then Hawaii. It was a great way to kick off the new phase of our lives.
My reason for retiring in January was mostly influenced by financial considerations. I had 5 weeks of vacation paid out, my company guaranteed my full target bonus if I retired in January ahead of the bonus payout period, and all my stock awards were guaranteed to fully vest over the next 3 years.
Could we have retired this spring or summer? Yes. We just didn’t want to. We were done with work and anxious to move on and begin our early retirement (56 years old).