Does the Month You Retire Matter? The Surprising Answer From CFP Kevin Lum
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Jordan Rosenfeld
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Molly Sullivan
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Many people think of retirement as a symbolic finish line, but precise timing can make a meaningful difference, influencing everything from taxes to mental health. In a recent YouTube video, certified financial planner Kevin Lum said the month you retire can act as a trigger for a series of financial and lifestyle changes, which is why there’s no one-size-fits-all answer.
“There’s no universally best month, but there could be a best month for you,” he said.
How the First 6 Months of Retirement Can Shape Your Well-Being
Lum said the early months of retirement do more than establish financial benchmarks. They often set the emotional tone for years to come. That makes the season you retire into especially important, particularly for people who are sensitive to weather or social isolation.
He pointed out that research has shown retirement itself can significantly increase the probability of clinical depression. While this can stem from the difficult transition of stepping away from meaningful work or daily structure, Lum said the season someone retires into can amplify those effects.
For example, a client of his who retired into a snowy Nebraska winter struggled more than other clients, largely due to the weather.
“The first six months of your retirement are vitally important … the way your retirement starts can have a profound impact on the tone you set for the rest of your retirement.”
Health Insurance Timing and Medicare Gaps To Watch Closely
Beyond mental health, the month you retire can affect healthcare coverage, a major consideration for older adults. Lum recommended lining up medical care and insurance transitions well before leaving work, especially for those approaching Medicare eligibility.
“You want to schedule any procedures before retirement while you’re still on your employer’s health insurance.”
If you’re close to age 65 and expect a gap in coverage before Medicare begins, Lum said it may make sense to time retirement so COBRA runs out right as Medicare starts. He also warned higher earners to watch for IRMAA, the Medicare premium surcharge, which is based on a two-year income lookback.
“The income you’re earning at age 63 is going to impact the amount of money you pay for Medicare at age 65,” Lum said. While retirees can often appeal the surcharge after stopping work, he noted that it can still come as a surprise if it isn’t planned for.
How Retiring Early in the Year Can Create Tax Planning Opportunities
From a tax perspective, choosing your retirement month can also be strategic. Lum said retiring in the first half of the year can open doors that don’t exist if someone works a full calendar year.
“Lower income in a particular year means lower tax brackets, which also provides a prime opportunity for things like, say, a Roth conversion or tax gain harvesting.”
Lower income during a partial work year can give retirees more flexibility to reposition assets or reduce future tax exposure.
Using a Lower-Income Year for Roth Conversions or Tax Gain Harvesting
Lum illustrated this point using a hypothetical retiree he dubbed “Ron Swanson,” (yes, that’s the “Parks and Recreation” TV show character) who earned $200,000 in a working year but only $50,000 after retiring in the first quarter. That income drop pushed him into a lower tax bracket, creating room for strategic tax moves.
If you retire earlier in the year, for example, you could have more room to do Roth conversions at a lower tax bracket. Another option may include tax gain harvesting, which involves selling an appreciated investment at a favorable or even 0% capital gains rate.
“In fact, he could use the money from the tax gain harvesting to help pay for the tax bill on the Roth conversion.”
Other Financial Details That Can Dictate the Best Month To Retire
While the month itself matters, Lum said dates tied to other financial benefits often matter more than the season.
Some important considerations include the date you become fully eligible for pension benefits, when bonuses are paid out and when equity compensation vests. Paid time off policies can also factor into timing.
“Honestly, you should be best friends with your HR department before you retire.”
Is There a Month Kevin Lum Tends To Prefer?
While stressing that every situation is different, Lum said certain months often strike a balance between income, taxes and lifestyle for many of his clients.
“I tend to like February and March as retirement dates for a lot of my clients.”
Those months often allow retirees to earn some income for the year, transition into improving weather and maintain more flexibility when it comes to taxes in their retirement year. Still, Lum emphasized that the right timing ultimately depends on each retiree’s personal circumstances.
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