Why Retiring in January Instead of December Could Make a Big Tax Difference

Why Retiring in January Instead of December Could Make a Big Tax Difference

One of the most overlooked retirement planning decisions is when you actually retire.

For some employees, retirement comes with a large final paycheck — unused sick days, vacation pay, bonuses, deferred compensation, or other lump-sum payments. If you retire in December, that money could land on top of a full year of wages, potentially pushing more of your income into higher tax brackets.

But retiring in January can create a very different tax picture.

Imagine you’ve already earned a full year of salary by December. Adding a large payout for unused leave could create a significant spike in taxable income. By waiting just a few weeks and retiring in January, that same payment may fall into a new tax year when your earned income is much lower.

That can create opportunities for tax planning, Roth conversions, charitable giving, capital gains management, and other strategies.

The key takeaway isn’t that January is always better than December. It’s that your retirement date is a financial planning decision — not just a work decision.

Before you turn in your retirement paperwork, look at what happens to your income, taxes, retirement benefits, and future cash flow under both scenarios.

Sometimes, the most valuable retirement decision you make happens before you retire.

At Lloyd Financial Group, we believe retirement planning is about more than asking, “Can I retire?” It’s about understanding when and how you can retire in a way that fits your entire financial picture.

Dream Bigger. Sleep Better.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

Colin Symons, CIO Lloyd Financial Group

Jobless Claims were 197K vs. exp. 201K, while Continuing Claims were up 2K to 1.719. Still a pretty strong employment picture.

The Current Account was -$246B vs. exp. -$255B. Less than expected, but that deficit is getting bigger.

New Home Sales were 684K vs. exp. 615K. That’s a very volatile number, but another sign consumers are holding up.

Kansas City Fed Manufacturing strengthened to 20 vs. prev. 17, with nothing getting worse.

Markets got a boost from more chatter about reopening the Strait of Hormuz.

Akamai (AKAM) is up 21% after getting a $12B cloud deal with Anthropic to support growing demand.

Durable Goods, KC Fed Services, and UMich Consumer Sentiment today.

Bottom line: Strong economic data continues to push the bond market to extremes, though we’re taking a little break this morning.

Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

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