I’m a Retirement Planner: 3 Reasons I Recommend People Don’t Retire in the Summer

Planning our retirement together

Pre-retirees often give plenty of thought to the age to start planning their retirement, whether this means claiming their Social Security benefits early at age 62 or working until they’re 70 for larger monthly payouts. But what about the best time of year to retire? Is it a good idea to retire mid-year or should you reconsider your target retirement date?

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GOBankingRates spoke to Spencer T. Hakimian, founder of Tolou Capital Management, who shares his thoughts on the three reasons why it’s not ideal to retire in the summer months — and a more optimal date to consider starting one’s retirement.

1. Timing of Bonuses and End-of-Year Benefits

Most retirees won’t be able to retire on Social Security alone. Generally, this means retirees are looking for as many ways to enhance their retirement nest egg as possible, whether this means maxing out pre-tax retirement accounts or cashing in accrued vacation time or unused sick time.

Hakimian doesn’t recommend retiring in the summertime due to the timing for bonuses and end-of-year benefits.

“Many companies disburse bonuses, profit-sharing payments and other incentives towards the end of the calendar year. Retiring in the summer could mean missing out on these additional income sources,” said Hakimian.

It’s also important to consider every company times their bonus distributions a little differently. A MassMutual blog post reads that some pre-retirees may consider retiring early in the year if their employer gives out year-end bonuses during Q1 of the following year.

2. Tax Considerations

Retirees who decide to retire mid-year, such as in June or July, will only have income for part of the year. According to Hakimian, this may push you into a higher tax bracket thanks to the combination of your salary and any early retirement distributions.

Being pushed into a higher tax bracket may result in a more expensive tax bill. However, Hakimian said retirees can avoid this by choosing to retire at the end of the year. This provides them with more time to plan their income and deductions to minimize taxes.

3. Seasonal Stock Market Trends

The stock market might be another reason why pre-retirees decide to wait to retire later in the year rather than mid-year.

“Historically, markets tend to perform better in the winter months due to factors like year-end rallies and increased consumer spending,” said Hakimian. “By retiring in the summer, you might miss out on these potential gains, which can negatively impact your investment portfolio’s performance right as you begin to draw down your savings.”

Consider This: Retire at the End of the Calendar Year

While the timing for which you decide to start retirement will depend on your own unique financial situation, Hakimian’s personal recommendation is to retire at the end of the calendar rather than during the summertime.

Doing so, he said, allows retirees to maximize their annual benefits, better manage their tax situation and potentially benefit from seasonal market trends.

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This article originally appeared on GOBankingRates.com: I’m a Retirement Planner: 3 Reasons I Recommend People Don’t Retire in the Summer