Is There a Best Day of the Year to Retire?
Taking into consideration the time of the month and the time of the year can make a difference in your retirement income.


This common question comes from those who are fortunate enough to have the flexibility to decide. The reality is that the date is often a compromise between you and your employer. A combination of that employer’s benefits, as well as IRS rules, should help you decide which day makes the most sense for you. In today’s article, we are going to cover three options and the potential benefits that come with each.
July 31
As a general rule, the end of the month is good for those with pensions, as those often start on the first day of the month after retirement. In this scenario, retiring on the 31st means that you won’t have a gap in pay.
The midyear strategy has to do with condensing all income into one calendar year so that you’ll see a drop in taxes the following year. This could be accomplished on December 31 if it weren’t for the lump sums that are often paid out in the months following your retirement. This may include bonuses, commissions, unpaid vacation and sick leave.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you see a significant drop in your tax bracket in the following year, you should evaluate Roth conversions and capital gains recognition. This is a tax sale.
December 31
As above, December 31 has the benefit of a full month of income with the pension starting the next day. This is a common date for federal employees, who are the kings and queens of gaming the retirement system. Retiring on December 31 is likely to maximize your unpaid annual leave check.
There’s a drawback, though: That lump sum will come next year. So, between that and your pension, you are unlikely to see a big drop in income taxes.
January 1
Pensions seem to be a recurring theme. Certain employers’ pension plans credit a year of service, for calculation purposes, on January 1. Similarly, you may get a cost-of-living adjustment by staying until January 1. This varies by employer.
This one makes sense for those who are retiring after required minimum distribution age. The money in your current employer’s retirement plan was exempt from RMDs due to the still-working exception. However, that RMD starts in the year you retire, even if that’s December 31.
In other words, if you retire on December 31, 2023, you will have two RMDs from your employer plan in 2024. The 2023 RMD will have to be taken by April 1, 2024, and the 2024 RMD by December 31, 2024.
If you retire on January 1, you’ll have only the 2024 RMD in December.
Other considerations
Vesting of retirement plans. I have seen six-figure sums left on the table by walking away before employer matches in retirement plans are fully vested. You will always get the money that you contributed. However, the employer match will follow some sort of vesting schedule that you need to outlast in order to keep that money.
Vesting of stock options. Stock options are a retention tool. Any unvested options will be forfeited when you are no longer retained. Here’s the thing: This is a moving finish line. Typically, employers will keep issuing new options on an ever-extending vesting schedule. At some point, you just need to pull off the Band-Aid.
Health care. This maze will be a topic of a future article. The most important thing for our clients is to ensure you have a plan between retirement and Medicare eligibility. Often, COBRA serves as the bridge. If that’s the bridge you want to use, you’ll need to work backward from age 65 to see when you can retire, based on how long your COBRA coverage will last.
People spend too much time trying to game this system. Of course, you don’t want to leave free money on the table, but it’s more important to ensure that you have enough than it is to decide between December 31 and January 1.
If you want one final check of your math, you can use this free software to see where you stand.
Related Content
- Six Financial Actions to Take the Year Before Retirement
- Four Keys to Budgeting for Travel in Retirement
- The Five Stages of Retirement (and How to Skip Three of Them)
- Do You Have the Five Pillars of Retirement Planning in Place?
- Five Things I Wish I’d Known Before I Retired
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
The Seven Best-Paying Side Gigs For Retirees
If you're worried you won't have enough saved for a comfortable retirement, or that life after work will be boring, these well-paid roles could be the answer.
-
$40,000 CD vs $40,000 High-Yield Savings Account - 3 Things Savers Should Consider Now
Both options offer risk-free methods to grow your savings. Learn how much you can earn with each, how they differ and which one suits you best.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to Know
If you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both Worlds
Before investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
How an Expired Passport Thwarted Blackmail (and What Other Important Documents You Should Keep)
An optometrist produced his expired passport to foil a blackmail attempt by the daughter of a former employee. After proving he was out of the country on the date of a forged diary entry, he took it a step further.
-
Optimize, Grow, Retain: The Power of Annual Client Reviews
Financial advisers can use annual reviews to help enhance client outcomes, strengthen relationships and build their practice.
-
I'm a Real Estate Investing Pro: This Is What Investors Should Know About Truck Stop Investments
Truck stops might seem like good investments, but they can actually be a risky gamble due to unstable fuel prices, unreliable operators and coming changes in transportation. Instead, consider safer options like industrial or residential properties.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams Now
Beyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
While some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.