Is there a best time of year to retire?

cfw1994

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/

Not sure I agree with all of their logic there…..

On point 1, the tax is complex - see my logic in the post above to see why you would perhaps want to work into the new tax year.  As I said, there is no clear right or wrong answer to this.

On ISA allowances, there is nothing to stop you crystallising some of your pension pot to take TFLS whilst you continue to work (assuming you are old enough!): we did that and took advantage of feeding ISAs, whilst still working👍

Point 5: I’d say retiring and planning to gift immediately isn’t necessarily the smartest thing to do, unless you have MUCH more money than you need: if that was the case: why not retire sooner 🤔

ex-pat_scot

General comments on when to retire, from a financial perspective:

- make sure you have paid sufficient NI to get a credit for the year's contribution.
- full £40k into pension, if you have sufficient earning capacity.
- earn below HR tax rate
- c/f as much holiday allowance (my scheme runs from Jan) 
- retire before the busy season (depends on your job and industry)
- when your bonus kicks in

For my circumstances, I reckon Christmas would be good:
- will have earned £40k into pension, and £50k salary by that point
- I could have 33 days' accrued holiday, so could actually stop early October with last official day 31/12.
- will certainly have enough for the NI credit

This approach does require me to fund the gap to 5 April out of savings. If I were to draw pension, then I'd get hit with marginal 40% rate, as I'd have taken the full £50k salary by that point and used up all BR band.

I can tweak a little perhaps- we might take a large family summer holiday, which would then mean I'd have 2 more weeks to work in October. Not a biggie.

From a lifestyle perspective:

- holidays and hobbies may dictate a preference. Gardening? Stop perhaps in May.  Cyclist? Again May.  Walker? Similar. Teacher / family commitments? End of summer term.

Albermarle

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/

This link assumes that you retire and immediately start taking pension income . It is clear that many posters on here do not actually do that .( or do not plan to do that ) . So the advice to retire  at the end of a tax year would not seem really valid for most people.

jamesd

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/

Interesting that none of the reasons except maybe the first or second is tied to when you retire. The other three can be done whether you've retired or not.

cfw1994

jamesd said:

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/

Interesting that none of the reasons except maybe the first or second is tied to when you retire. The other three can be done whether you've retired or not.

& as I put it above, I would challenge the first as not being 100% certain in all cases….

hugheskevi

Albermarle said:

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/

This link assumes that you retire and immediately start taking pension income . It is clear that many posters on here do not actually do that .( or do not plan to do that ) . So the advice to retire  at the end of a tax year would not seem really valid for most people.

I am one of those not taking pension, and retiring at the end of a tax year would be the worst possible time for me.

In January, I hit higher rate tax, so that is a logical time to depart as the return from work is lower. But if I continue working, I then get a Personal Allowance for the following year, which I would use by mid June meaning I can work tax-free for those two months.

So I view my 'leaving window' as being between June-January, as if I decide not to leave in January then I have strong incentives to remain until at least June.

Dead_keen

Today  :-)

On-the-coast

I didn’t read the first article, but if my retirement date ends up being my decision, then the financial (and mentally) most advantageous time for me would be mid summer.
Depending on timing of bank holidays etc (and my holiday year running from 1 January and allowing carry forward), I could probably pick a retirement date at the end of August which would allow following:

• Maximum annual pension contributions 
• no more than 20% tax
• crystallisation of enough vacation time to allow effective retirement date to be mid July…
• a summer to enjoy…

This would be independent of actually drawing pensions - i would have to look at scheme rules - i hope I’d be allowed to start my pensions a few weeks after annual revaluations - as that would seem most efficient to me. But I plan to live on savings until main pensions kick it at NRD.

bigfer

When the project you are working on is about to turn to the sticky stuff and your fingerprints are all over it.
....best day of my life....

Albermarle

On-the-coast said:

I didn’t read the first article, but if my retirement date ends up being my decision, then the financial (and mentally) most advantageous time for me would be mid summer.
Depending on timing of bank holidays etc (and my holiday year running from 1 January and allowing carry forward), I could probably pick a retirement date at the end of August which would allow following:

• Maximum annual pension contributions 
• no more than 20% tax
• crystallisation of enough vacation time to allow effective retirement date to be mid July…
• a summer to enjoy…

This would be independent of actually drawing pensions - i would have to look at scheme rules - i hope I’d be allowed to start my pensions a few weeks after annual revaluations - as that would seem most efficient to me. But I plan to live on savings until main pensions kick it at NRD.

I retired in mid July for similar reasons . Unfortunately the Summer has not materialised so far . 

On another note , timing starting  a DB pension is not as easy as it sounds . The administrators who look after many private sector DB pensions are notoriously incompetent, and I think waits of a few months with regular chasing are not uncommon. As I am finding out .....