When Is the Best Time to Retire?

University of Michigan logo with the words "Planning for Retirement" on a blue and yellow background

There’s no one-size-fits-all approach to choosing a retirement date. Here are some common financial considerations to help you figure out what’s best for you.

First, Check When You’ll Be Eligible

The Estimated Retirement Eligibility Date program on Wolverine Access calculates your estimated retirement date. Log in and select Employee Self-Service > Benefits > Retirement Self-Service > Est. Retirement Eligibility Dt.

Retiring Early? Avoid Tax Penalties

You may have to pay a 10 percent tax penalty on money you withdraw from your retirement savings accounts before age 59½.

Exceptions: This penalty does not apply on withdrawals from a 457(b) Deferred Compensation Plan account. It also generally does not apply to other types of U-M accounts if you retire during or after the calendar year in which you turn 55. For more information on exceptions to the 10 percent penalty, review Tax Matters.

Understand the Cost of Health Benefits Before Age 62

If you retire before age 62 and your date of service is on or after July 1, 1988, you will be responsible to pay the full cost of your benefits through the month you turn 62.

You can also choose to initially waive retiree medical and/or dental coverage from U-M and re-enroll at age 62, when you would qualify for a contribution toward the cost of your benefits. To remain eligible, you must maintain comparable coverage the whole time (for example, through a spouse’s employer) and re-enroll with U-M within 30 days of turning 62.

Weigh Health Care Changes Carefully

Between now and 2021, the university will continue to phase in changes to the contribution to retiree health benefits. If you’re considering retiring before 2019 or 2021 due to these changes, you’ll want to carefully weigh the possible savings against the “cost” of retiring early, which includes fewer years earning your current salary, contributing to your retirement accounts and paying into Social Security.

Here’s what the changes mean.

Slightly Lower University Contribution Starting in 2019

In 2019 the contribution to health benefits for new retirees will go down by 2.5 percent for the retiree and 5 percent for dependents as compared to today. While we don’t know what premiums will cost in the future, the same adjustment in 2017 meant an increase of $10-14 per month for single coverage, $29-42 per month for two-person coverage, and $53-63 per month for family coverage, depending on the plan and Medicare status. (Note: These figures are based on past experience and provide no guarantee of future benefit plan rates or rate changes.)

University Contribution Based on Years of Service Starting in 2021

Starting in 2021, if you were hired before 2013, you’ll need 20 years of service to be eligible to receive the maximum contribution to health benefits as a retiree. If you retire with 20 or more years of service, there’s no change from 2020. But if you retire with 10 to 20 years of service, the amount you receive towards your benefits will be pro-rated. You’ll receive a larger contribution for more years of service, up to the max at 20 years.

If you were hired in 2013 or later, the same rules will apply starting in 2021, but the maximum university contribution you can receive will be lower.

Understand When Retiree Benefits and Medicare Begin

U-M Benefits

If you’re eligible for benefits when you retire, you’ll keep your U-M employee benefits through the end of the month and your retiree benefits will pick up on the first of the following month. The only exception is if you retire on the first of the month, in which case your retiree benefits start that same day.


If you retire before age 65, you’ll want to apply for Medicare three months before your 65th birthday, or whenever first eligible. As of the first of the month in which you turn 65 (or the previous month, if your birthday falls on the first of the month), your retiree coverage through U-M will no longer pay for anything that Medicare Parts A and B should cover. You’ll want to make sure your Medicare coverage is active to avoid claim problems.

If you and your spouse are age 65 or older when you retire, you’ll want to apply for Medicare no later than the end of the month in which you retire in order to avoid claim problems. If you’re retiring on the first of the month, apply for Medicare the month before.  

Learn more

We know life can be complicated. That’s why we want to help you get the most out of your retirement. For complete information, browse retirement planning resources or register to attend a Planning for Retirement class offered by the Benefits Office.