Alessandra Malito

Wed, May 14, 2025, 9:20 AM4 min read

My tax preparer said that I should not retire mid-year because of my income level. She said I will have to pay back my Social Security. Do I need to take this into consideration?

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As the saying goes, timing is everything.

When you’re financially, mentally and emotionally prepared to retire, there’s no “wrong” time of the year to do so. However, there are some ways to make it a more ideal time, and that is likely what your tax preparer was trying to tell you.

Yes, it’s true that a mid-year retirement can impact your taxes and Social Security, but it depends on a few factors. Also, you don’t exactly “pay back” your Social Security, but I will get to that in a minute.

I don’t know your income, but if you stop earning income in the middle of the year and then draw down from your retirement accounts and Social Security, your taxable income may be higher than expected.

A much higher taxable income could affect your tax bracket, Medicare premiums and ultimate tax bill, said Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies.

“The key is making sure withholding and/or estimated tax payments are adjusted accordingly,” he said. “As long as that’s accounted for, retiring mid-year isn’t inherently problematic. Planning ahead can smooth the transition and avoid any unpleasant surprises at tax time.”

Retiring in the middle of the year can affect a few other things, too. For example, your health insurance. If you aren’t 65 yet, you’ll have to find healthcare another way.

Keep in mind, many health-insurance deductibles are based on the calendar year and, even if you’ve already started paying toward it, you might have to start over toward a new deductible in the new plan, said Melissa Caro, a certified financial planner and founder of My Retirement Network.

She brings up another good point: a pension. If you have a pension, the payout could be based on a formula that averages the highest three or five years of earnings. If you’re at your peak earnings and you stop mid-year, you’re essentially taking that year out of the running in the calculations, she said.