Is there a best time of year to retire?

lucyandthomas

Very much thinking ahead, as I'm at least 4 years away from retirement. I can but dream.................

Once we're at our magic number for retirement, what factors are there to consider when deciding which month to retire?

There won't be any carry forward by then as we'll have max'ed it out, so max pension contribution for the year will be 40K. Is this reduced if I were to retire mid year? If not, presumably once I've earned enough that year to stash 40K in the pension (including employer contribs), there is no advantage (other than earning a few more months salary) to working any more months in retirement year? Or is is better to retire at the end of a tax year?

Just general musings really.

Thanks for any advice.  

jamesd

No reduction for part of a year. Working long enough to get to 40k is a decent point. Another possible one is working for at least two months in the year or as long as it takes to get the year to count for NI and state pension.

kuratowski

From similar threads in the past, I think people get a kick out of working until end of May, because the bank holidays aren't evenly distributed though the year

And that way, you are retiring in summer when the days are longer and the weather (possibly) better so it can be good time of year to start retired life.

marlot

Psychologically: I'd recommend the spring - many activities are opening up, the days are getting longer, easier to get stuck into projects and retirement activities.

Though, as someone with a long commute, the sound of others having to scrape their car windows, whilst I just turned over in bed was a great reminder of why I retired!

I phased my retirement - dropping to 4 days a week, then working from home a couple of days [writing handover notes, training guides etc], so when I went it was much less of a change.

uss_tish

If you are higher tax payer, best retire at the end of the tax year..

lucyandthomas

uss_tish said:

If you are higher tax payer, best retire at the end of the tax year..

Please can you explain why?

Dansmam

lucyandthomas said:

uss_tish said:

If you are higher tax payer, best retire at the end of the tax year..

Please can you explain why?

I am wondering too. I packed work in mid year so went from higher rate to basic with a refund from HMRC. Claimed immediately and the refund arrived pretty much straight away. Not claiming pension yet so it was a useful boost to the savings pot.

marlot

uss_tish said:

If you are higher tax payer, best retire at the end of the tax year..

I retired end dec, and delayed drawing down my DC pension until april.  So had a nice tax refund.

cfw1994

kuratowski said:

From similar threads in the past, I think people get a kick out of working until end of May, because the bank holidays aren't evenly distributed though the year

And that way, you are retiring in summer when the days are longer and the weather (possibly) better so it can be good time of year to start retired life.

Agreed….I went after the first bank hols in May…had a reason, else I might have stayed until the end of May!

https://forums.moneysavingexpert.com/discussion/6065262/best-time-of-year-to-retire-uk/p1 was me asking the same thing some time back.  

In summary, I would say sometime before summer: my first 3+ months have been superb: had it been all winter, it would not have been nearly as much fun! 

lucyandthomas said:

uss_tish said:

If you are higher tax payer, best retire at the end of the tax year..

Please can you explain why?

It depends how you plan to fund the first year of retirement.  I don’t see a perfect answer…

FWIW…I expect to pay 20% tax throughout retirement.   

For my first year, I have enough savings that I only plan to take a certain amount from DC pension pot….therefore my logic was to work a little into the year to ensure the total I take from the pension added to that earned was just shy of that approximately £50k total.

Yes, it meant I paid some 40% tax at the start of the year….but that will all get sorted by the next tax return, & could be done early if I wanted - form P55, IIRC…..I’m happy to wait, to see a future ‘bonus payment’ 😉

uss_tish

As you may have to pay 40% tax on your pension, depending on earnings to date at the point of retirement:
https://rtsfinancialplanning.co.uk/why-its-best-to-retire-at-the-end-of-the-tax-year/

lucyandthomas

uss_tish said:

As you may have to pay 40% tax on your pension, depending on earnings to date at the point of retirement:
https://rtsfinancialplanning.co.uk/why-its-best-to-retire-at-the-end-of-the-tax-year/

Thanks for this. I wouldn't be touching my pension in the year of retirement. Plan is to use ISA savings until I turn 55 in 2027.