How and When to Retire From a Job
Start Planning for What Comes Next, Long Before You Leave
Retiring from your job is one of the most important career decisions you’ll make, and there are many factors to consider when you’re deciding whether it’s time.
Retirement doesn’t necessarily mean the immediate end of your working life. It can be a transition that happens in stages over time. It could be a career change from the field you have worked in for years to a brand new retirement career, or you could give up full-time, 40-hour-a-week employment for the flexibility of freelancing.
Learn more about how to retire from a job, and get information on retirement options, figuring out finances, supplementing your income, or starting a second career.
When Do Most People Retire?
To collect Social Security benefits, the full retirement age is 66 if you were born between 1943 and 1954. If you were born between 1955 and 1960, the retirement age gradually increases until it reaches 67.
Many workers continue to work beyond the time they are eligible for Social Security. The Bureau of Labor Statistics (BLS) reports that the workforce participation rate for workers ages 65 and older was 36.9% in 2019 and is projected to be 45% in 2029. This is a significant increase from 23.4% in 1999.
A study from the Employee Benefit Research Institute found that the median age at which workers expect to retire is 65, but the one reported by most retirees is 62. Meanwhile, 31% of workers expect to retire at age 70 or older or not at all.
From a practical perspective, it’s important to carefully plan your departure, evaluate your finances, and move on—regardless of whether you love or hate your job—in a professional and graceful manner.
When Should You Retire?
When you choose to retire is a personal decision, but the pandemic has impacted the plans of many workers. If you’re considering what to do, you’re not alone.
A Harris Poll conducted on behalf of TD Ameritrade reports that 71% of Americans expect COVID-19 to impact their retirement plans. In many cases, that means working longer, but for some workers, it means retiring early. According to the survey, 23% of seniors aged 55 through 73 have retired early or are considering retiring early due to the pandemic.
It’s smart to consider getting professional advice so you’re aware of how your financial situation may change once you retire. It’s a time when you don’t need any surprises.
Sue Ann Donovan, a wealth advisor at New York-based Holistic Wealth Advisors, said, “What is most important when deciding when to retire is ensuring that your expectations are aligned with your assets. It’s important to have a realistic outlook for your retirement, and, for a couple, it’s essential that your retirement goals be in sync.”
Transitioning Into Retirement
One way to ensure a smooth transition is to consider a variety of options for retiring. Your employer may want to keep you on board for as long as possible, tap you to train a replacement, or have you help with special projects. You may be more comfortable with a longer departure, or you may just want to move on as soon as you can.
Before you turn in your retirement notice, check with your manager or human resources department on what options are available if you want to continue your relationship with the employer—or if you don’t. Different types of retirement include the following:
- Early Retirement: You may be able to retire early and collect retirement benefits from your employer.
- Phased Retirement: Your employment is phased out over a period of time that concludes with your retirement.
- Full-Time to Part-Time to Retiree: Some employees are able to downgrade their position and work on a part-time basis prior to retirement.
- Employee to Contractor: Another option is to continue to work for your employer but as an independent contractor rather than as an employee.
Get the Information You Need to Make a Decision
The more data you have, the better equipped you’ll be to make a decision on when it’s retirement time. Make sure that you have company login information and copies of retirement-related documents you can access from your personal computer rather than the office. These include pension and 401(k) plan information, employer-provided retiree benefits, unused leave time policies, and continuance of insurance benefits. If you have access to all the information you need, you’ll be prepared to move on, even if your employer decides that you’re not needed in the office.
It’s smart to schedule an appointment with a financial advisor prior to making a final decision on when you’re going to retire.
If you don’t plan on working in retirement, you’ll need to carefully evaluate your finances to ensure stability during your post-career years. If you do want to continue to work, give some thought to options that might be a good fit for the next phase of your career.
How to Notify Your Employer
Unless you have an employment contract that stipulates otherwise, you’re not obligated to give notice. That’s because many employees are considered to be “at will,” meaning that they can resign, or their employer can terminate them without notice. However, two weeks is considered the standard notice period.
If you’ve worked for a company on a long-term basis, it makes good sense to discuss retirement options with your manager and human resources department. You may want to provide a longer notice period. Some large employers have retirement-planning assistance available to help you navigate the process.
Having a conversation with your HR department can help you plan a smooth transition away from employment on a time frame that works for both you and the employer. Be prepared, and have questions ready to ask:
- Are there retirement options (for example, phased or early) available?
- What is your eligibility for retirement benefits—pension, 401(k), retiree health and life insurance, and other retiree benefits?
- Will there be any gaps in coverage before you become eligible for benefits?
- Will you be entitled to be paid for unused sick leave?
- If you have deferred compensation or employee stock options, how will they be handled?
- Will you have a retirement contract, and if so, will it have any terms (like a non-compete agreement) that limit your ability to earn?
- What will your official retirement date be? (This is important for collecting Social Security and Medicare benefits.)
There is no need to share your plans with colleagues until you’ve made a final decision. Your boss needs to hear the news from you, not one of your co-workers.
Supplementing Your Retirement Income
If you’re considering retirement, or if your employer is indicating that it might be a good option for you, start thinking about whether you will need to supplement your retirement income.
In the wake of the COVID-19 pandemic, more than half of Americans (51%) have become more open to looking for a job in retirement. If you’re one of them, there are many different ways you can make money without committing to another full-time position. Consulting, freelance gigs, short-term jobs, and contract work are all options to consider. Keep in mind that your earnings and age may reduce your Social Security benefits.
If you don’t have an employment contract that limits what outside work you can do, one way to phase into retirement with an income flow is to start working as a freelancer prior to retirement.
Starting a Second Career
It’s never too late for a restart. Retiring from your first career doesn’t necessarily mean that you’re retiring from work. Many people have successfully started a second career at an older age. Leo Goodwin founded GEICO when he was 50, Colonel Sanders was 62 when he franchised his first Kentucky Fried Chicken, and Carol Gardner started Zelda Wisdom when she was 52.
This time around, you might want to do something completely different from your first career, and there are plenty of options to choose from.