Retirement Decisions: What a Difference a Month Makes
September 27, 2010I got a call the other day on the financial helpline from an employee who is retiring next year. He had always planned on retiring in the month of June and noticed a trend this year of managers in his company retiring in August. Now this gentleman had over 35 years of service so you wouldn’t think two months would have made much difference.
So we did some digging and here is what we found. The main reason to wait is for the company stock performance award that hits the end of June: he still wants to be an active employee at that time. Most employees have a vesting period for this kind of award but in his case, he won’t have to wait since he is retiring – the shares are immediately available to him. His company has an “extra” variable match during profitable years in his 401(k) that lands in employees’ accounts on July 15th and he will want to be an active employee for that extra bonus also.
Is it worth it to stay because he really wants to retire? How much are we talking here? In his case, the stock incentive is over $10,000 and when you add the variable match for the 401(k) that brings it to $12,580. There are probably some more incentives but let’s just take a look at these two. By timing his retirement correctly, we are looking at 8 more weeks of work. At 40 hours a week, he would be “earning” an additional $39.31 per hour during that time. Most people would agree that it’s worth it.
Timing does make a difference. When you are considering a decision as important as the retirement date, we can all take a lesson from this gentleman and watch what others are doing. Then call a professional to figure out if there is something to it. In his case, it was a $12,000 question!