Retire Now or Work One More Year? 2025 Decision Guide

Same nest egg, two paths: retire today vs. work 12 more months

Same nest egg, two paths. Retire now or work 12 more months. On paper it looks trivial. In practice, cash flow timing, taxes, healthcare, Social Security, and your stomach for risk, it’s not trivial at all. It’s Q4 2025, bonuses are getting finalized, RSUs are vesting, and Medicare premiums for 2025 are already set off your 2023 income. Timing matters, annoyingly so.

Quick before-and-after, no fluff:

• Retire today: Portfolio withdrawals start immediately. If you’re under 65, healthcare likely shifts to ACA or COBRA (COBRA typically up to 18 months). Taxes hinge on what you sell, pre-tax vs. Roth vs. taxable, and your capital gains. Social Security? You either claim now or bridge with portfolio/part-time income. Sequence risk is front-loaded.
• Work one more year: One more savings tranche goes in, you have one fewer year to fund, maybe you keep employer healthcare, and delaying Social Security can raise your benefit. You also keep 2025 earned income, which affects this year’s taxes and, because Medicare uses a two-year lookback, could influence 2027 Part B/D premiums if your MAGI pops higher.

Facts that bite (but help planning):

• ACA: Enhanced premium tax credits are extended through 2025; benchmark premiums are generally capped near 8.5% of household income for eligible buyers (American Rescue Plan/Inflation Reduction Act).
• COBRA: Typically available for 18 months after leaving an employer plan.
• Medicare: Premiums use a two-year MAGI lookback (your 2025 premiums are based on 2023 income; 2027 premiums will reflect your 2025 income).
• Social Security: Delayed retirement credits add about 8% per year to benefits from Full Retirement Age up to age 70 (SSA rule, not a market guess).
• RMDs: The current required minimum distribution age is 73 (SECURE 2.0).

So what actually changes if you wait a year? Cash flow first: keeping your paycheck in 2025 means fewer portfolio withdrawals when sequence-of-returns risk is highest. That first decade of retirement is fragile, if markets wobble early, pulling 4-5% while your balance is down can lock in damage. One added year can shrink the withdrawal rate required in years 1-10, which is where I’ve seen plans either hold or crack. I’ve watched too many spreadsheets pretend early drawdowns don’t happen. They do.

Taxes next. This year’s comp, salary, bonus, RSUs, option exercises, lands in your 2025 AGI. That number drives your tax bill now and may push you into IRMAA surcharges in 2027. Is that bad? Not necessarily. Paying a bit more in Medicare later might be worth deferring Social Security another year for the ~8% bump and maxing pre-tax or Roth space now. It’s a trade, not a moral choice.

Healthcare is the pivot. Retire now and you price ACA (with subsidies if your income qualifies) or use COBRA for up to 18 months. Work one more year and employer coverage probably bridges to 65, which is huge if you’re 63-64. I know, it feels like paying for insurance you “might not need.” That’s the wrong lens; you’re buying option value and reducing sequence risk.

What’s my take? If your margin of safety is thin, one more year often strengthens the first decade, more savings, fewer withdrawals, bigger Social Security later, and cleaner healthcare. If you’re already overfunded, retiring now and harvesting a low-income year for Roth conversions and ACA subsidies can be smarter. Is that contradictory? Yep, and that’s the point. The right answer is path-dependent and 2025-specific.

Your retirement number, updated for how you actually spend

Time to translate lifestyle into an actual spending plan that matches 2025 prices, not some dusty national average. I split it into two piles: must-haves (keep the lights on) and nice-to-haves (make it feel like a life, not a budget bootcamp). Tag each line with two numbers: what it costs this month and your 12‑month average, because one bill doesn’t tell the whole story, a year of bills does.

• Must‑haves (monthly | 12‑mo avg)
  • Housing (property tax, insurance, HOA, maintenance): $2,150 | $2,090
  • Healthcare (premiums, deductibles, meds): $1,050 | $980
  • Groceries + household: $750 | $720
  • Utilities + internet + mobile: $340 | $335
  • Transportation (fuel, routine service, transit): $260 | $295
  • Taxes (withholding/est. payments net of refunds): $1,100 | $1,120
• Nice‑to‑haves (monthly | 12‑mo avg)
  • Travel: $600 | $450
  • Dining/entertainment/hobbies: $500 | $520
  • Family gifts/charity: $300 | $310

Then add the ugly-but-real stuff that isn’t monthly. Don’t wait for surprises, use sinking funds so they’re boring when they arrive:

• Roof every 20 years at $24,000 → save $100/month
• Car every 10 years at $35,000 → save $292/month
• Major dental/vision every 5 years at $6,000 → save $100/month
• Weddings/grandkid boosts (if you want it) $20,000 spread over 8 years → save $208/month

Healthcare, grounded in facts: Fidelity’s 2023 estimate pegged lifetime healthcare costs for a 65‑year‑old couple at $315,000 (not including long‑term care). Keep that as a compass, but refine with your numbers: your Medicare Part B/D premiums or ACA premiums if you’re retiring before 65, your actual copays, your prescriptions by name and dose. If you take generic atorvastatin and a GLP‑1, price those, one brand‑name med can swing the plan by thousands a year. I’ve seen clients think healthcare is $500/month and it’s really $1,200 once you stack premiums + OOP max + meds. It’s not fear, it’s math.

Inflation: use a base assumption that fits 2025’s reality. For planning, I use 2.75%-3.00% as the core inflation glidepath for most categories, then stress‑test at ±1-2% (i.e., 1.75% and 4.75%). Healthcare and tuition‑ish items get a premium (add 1-2% on top), while tech and electronics can run lower. Don’t contort old stats to fit 2025; just tag each line with its own rate: groceries at 3%, travel at 2.5%, healthcare at 4.5%, property taxes at whatever your county has actually done the last 3-5 years.

Longevity: plan for at least 30 years from your retirement date. Then add a long‑life case to 95 or even 100. You won’t regret overshooting here, running out of money at 89 because you planned to 85 is not a cute story. I run base (30 years), long‑life (+10 years), and stress inflation on top; it’s repetitive, and it’s necessary.

Put it together (simple stack):

1. Sum must‑haves. In the example above that’s about $5,650/month before sinking funds.
2. Add nice‑to‑haves you actually intend to keep (not your aspirational self), say $1,400.
3. Add sinking funds (~$700). Now you’re around $7,750/month or $93,000/year.
4. Layer inflation category by category and run three cases: base, base +2%, base −1%.
5. Overlay taxes correctly. If you’re drawing from pre‑tax IRAs, your gross withdrawal will be higher than your spend; if you’re in ACA years, mind the cliff, keeping MAGI under the right threshold can be worth thousands. A $4,000 premium credit offsets a lot of budget angst.

Now pressure test against your income stack: Social Security (delayed or not), pensions, bond ladders, CDs, and portfolio withdrawals. With real yields still respectable on TIPS and CDs this year, a 5-10 year liability‑matching ladder can de‑risk the first decade, sequence risk hates predictability, which is exactly what ladders give you. Not perfect, but it’s calmer.

And yeah, it’s a lot. The point isn’t to be perfect; it’s to be approximately right and repeatable. Separate needs from wants, price them in today’s dollars with a 12‑month reality check, then let inflation and longevity push the plan around a bit on paper, not in your life. If you redo this annually, tiny course corrections beat heroic fixes later, every single time.

What one more year really buys (it’s more than a paycheck)

Keep the salary, sure, but the real magic of an extra 12 months is in the levers it gives you. It’s compounding, sequence‑risk relief, tax positioning, and benefits that echo into your 60s and 70s. I’ve seen this again and again, one extra year often moves the plan from “tight” to “comfortable,” even when the headline number (your wage) isn’t the star.

Max the tax shelters while you still can. For 2025, the IRS limits let you shovel real money into pre‑tax or Roth buckets: 401(k)/403(b)/457 elective deferrals cap at $23,500; if you’re 50+, the catch‑up is another $7,500 (total potentially $31,000 per plan). HSAs are higher too this year: $4,300 self‑only and $8,550 family, with a $1,000 catch‑up at 55+. Those dollars get a full extra year to compound. At a modest 5% expected return, an added $31,000 is about $1,550 in incremental growth in year one, then it keeps snowballing. Not heroic math, just arithmetic.

One less year to fund. A 30‑year retirement horizon becoming 29 slightly raises your safe withdrawal capacity. The rule of thumb many planners run (think 3.6%-4.0% bands subject to market valuations) nudges upward when you lop a year off the tail. It’s not about chasing a magic number; it’s shrinking the problem you’re asking your portfolio to solve.

Social Security credits are real money. If you’re past Full Retirement Age, delaying continues to earn about 8% per year in delayed retirement credits until 70 (this SSA rule has been around for years). That’s not market‑risked; it’s baked into the benefit formula. For couples, coordinating the higher earner’s delay can materially boost survivor income, future you will thank current you.

Pension and pay math. If you’ve got a defined benefit plan, one more year can add service credit and sometimes a higher final‑average‑pay, permanently lifting the annuity. I’ve seen late‑career raises bump checks by hundreds per month because they slid into the averaging window. It’s quirky plan‑by‑plan, so read your booklet (yes, the PDF you keep avoiding).

Healthcare bridge. Staying on employer coverage one more year can get you closer to Medicare at 65 or reduce the number of ACA years where premium credits can cliff if MAGI runs high. And watch the Medicare IRMAA timing: it uses a two‑year lookback. 2023 income affects 2025 premiums; working one more year in 2025 can shape 2027 brackets. For reference, the first IRMAA threshold used for 2025 is based on 2023 MAGI of $103,000 (single) / $206,000 (married). Staying under a bracket can save hundreds per month, real cash flow, not theory.

Portfolio risk, quietly lower. Another year of contributions with zero withdrawals reduces sequence‑of‑returns risk. You’re adding ballast while markets do whatever markets do. Right now in Q4, 10‑year TIPS real yields are still around the low‑2% area, and plain CDs remain respectable compared to the last decade, so fresh contributions can buy decent, boring income. Boring is underrated.

Quick reality check list (not exhaustive, but it gets you 80% there):

• Max 401(k)/403(b)/457 to $23,500 (+$7,500 catch‑up at 50+); consider after‑tax and in‑plan Roth if it fits.
• Max HSA: $4,300 self / $8,550 family (+$1,000 catch‑up at 55+).
• Re‑run the plan at 29 years instead of 30; note the withdrawal rate impact.
• Price Social Security at FRA vs. delay; credit ~8%/yr to 70.
• Verify pension accrual and final‑average‑pay windows.
• Model ACA vs. employer vs. Medicare timing; map IRMAA two‑year lookbacks.

Side note: I once told a client to take “one more lap” at work because the HSA and IRMAA math looked tight. He grumbled, stayed, and then bragged about his 2027 Part B bill being lower than his golf buddies’. Petty? Maybe. Effective? Absolutely.

It’s not that working another year is fun, sometimes it is, often it’s not. It’s that the compounding, credits, and coverage you stack in that year reach forward and make the next 25-30 a lot easier. That’s the trade.

Withdrawal math that won’t wreck the first decade

Year one is where good plans go sideways. Not because markets are evil, but because sequence risk shows up early and doesn’t ask permission. The antidote isn’t a magic number; it’s a right-sized starting rate, guardrails, and a little cash that buys you time when stocks throw a tantrum.

Quick history so we’re on the same page: Bill Bengen’s 1994 paper found that a 4% initial withdrawal, adjusted for inflation, survived all 30-year periods in the U.S. data he studied with a roughly 50/50 to 75/25 stock/bond mix. That research birthed the “4% rule.” Useful? Yes. Sacred? No. Markets change, yields change, spending isn’t perfectly linear. Morningstar’s 2023 retirement income study suggested a more conservative ~3.8% starting rate for 30-year horizons, paired with adjustments over time (raise or cut depending on portfolio health). That framing, flexibility beats precision, still holds this year.

Why the caution now? We’ve got a mixed setup in 2025: cash and Treasuries finally pay something again, but equity valuations aren’t cheap after the big rebound last year and earlier this year. If the first 3-5 years are choppy, a rigid 4% with no brakes can bite. So, guardrails. I like the Guyton‑Klinger style rules (2006): set a starting withdrawal, then use bands and decision rules. Example: if your current withdrawal rate (this year’s dollar draw ÷ current portfolio) drifts more than ~20% above the initial rate, cut withdrawals by ~10%; if it drifts ~20% below, consider a 10% raise. Is 20/10 the only way? No, but the idea, systematic nudges, prevents overreacting and helps the plan breathe.

Cash buffers next. Do you need 5 years in cash? No. But 1-2 years of planned withdrawals is practical: at a 3.8%-4.0% starting rate, that’s about 4%-8% of the portfolio parked in high‑yield savings or T‑Bills. The rule that matters is the refill rule. I use two simple versions: (1) only top the cash bucket after a positive calendar year and when equities are at or above their target weight, or (2) top quarterly, but only using dividends/interest plus equity trims when the equity sleeve is >2-3% above target. Both reduce the odds of selling stocks into a drawdown. Small aside, I once tried a “always refill monthly” version. Looked clean on paper, felt awful in 2022. I cut it.

Asset mix is the other half. A middle lane, say 50/50 to 60/40, kept Bengen’s historical worst cases in range, and today’s bond yields actually earn their keep again. Do you go 70/30 for more growth? Maybe, if your guardrails are tighter and your cash bucket is sturdy. Or you start a hair lower on withdrawals. Which brings me to something I haven’t said clearly enough: starting lower compounds safety. A 0.5% lower initial rate (say 3.5% vs. 4.0%) on a $1.5M portfolio is $7,500 less in year one. Annoying? A bit. But if the first two years are flat, that smaller draw often means tens of thousands more left invested when the rebound shows up.

Taxes, don’t let them set your withdrawal rate for you. Map account sequencing early:

• Taxable first when markets are calm to harvest capital gains at favorable brackets and let IRAs grow while you do strategic conversions.
• Traditional (pre‑tax) in measured doses to fill your chosen ordinary income bracket and manage the two‑year IRMAA lookback for Medicare, spikes here can raise Part B/D premiums.
• Roth as your flex bucket for years you want spending but need to keep MAGI low (ACA subsidies pre‑65, or IRMAA management after 65).

Okay, small correction: sometimes it’s taxable and a bit of IRA via Roth conversions in the same year to prep for RMDs. The point is control. You want the tax tail wagging exactly zero dogs.

One more point that sounds boring but works: working one more year. Not glamorous. But every extra year usually does three things: (1) boosts the portfolio with contributions plus maybe another compounding year, (2) shortens the horizon by a year, yes, re‑run your plan at 29 years instead of 30; the implied safe rate ticks up, and (3) covers health insurance and lets you choreograph Roth conversions around ACA or IRMAA. In practice, that extra year often lets you start at 3.4%-3.6% instead of pressing for 4.0%, which is exactly how you defang the first decade.

Circle back to guardrails: you don’t need to predict 2026. You need a rule that says “if the portfolio is down 15% and the withdrawal rate drifts high, trim spending by 5-10% and pause COLA.” Then when markets recover, you catch up. It’s not perfect; it’s resilient. There’s a difference.

Bottom line: use Bengen (1994) as the floorboard, Morningstar 2023’s ~3.8% as a current sanity check, layer guardrails, keep 1-2 years’ cash with a disciplined refill rule, and choreograph taxable/traditional/Roth to manage brackets and premiums. That’s how year one doesn’t become the Achilles’ heel of years two through ten.

Taxes in the gap years: the quiet edge

The years between your retirement date and age 73 are sneaky-powerful. SECURE 2.0 (enacted 2022, effective 2023) moved the RMD age to 73, which gave many households a bigger window to reshape lifetime taxes. If you keep working this year, re-check the window’s size, one extra W-2 year can crowd out conversions and push work into later years when Social Security and RMDs are stacked on top. I’ve watched this play out a dozen times; the “work-one-more-year” decision solves sequence risk but, yep, can compress the tax playbook.

Here’s how I’d structure the gap years in plain English:

• Roth conversions: In years with low ordinary income, “fill” the lower tax brackets with conversions from pre-tax IRAs to Roth. The idea is simple: pre-pay tax at friendlier rates now to avoid forced withdrawals later at higher rates. I aim to fill up to the top of the bracket that still looks reasonable for your lifetime plan (often the 12% or 22% bands, but that’s a model call). The payoff isn’t the refund this year; it’s lower RMDs and more tax-flexibility in your 70s and 80s.
• Capital gains harvesting: If your taxable income is modest, realize long-term gains purposefully to reset basis. In 2024, the 0% long-term capital gains bracket threshold was $94,050 for married filing jointly and $47,025 for single (IRS 2024). That’s not 2025 guidance, but it shows the ballpark and the tactic: harvest up to the 0% line, then stop. It’s like free dental work for your cost basis.
• QCDs and the charity lever: Once you hit age 70½, Qualified Charitable Distributions can send money directly from an IRA to a qualified charity. Pre-RMD, QCDs don’t lower anything required (since nothing’s required yet), but they do build the habit. Once RMDs begin, QCDs can satisfy RMD dollars without bumping adjusted gross income, often better than itemizing. Clean and tax-efficient.
• ACA and IRMAA coordination: Before 65, ACA premium tax credits are incredibly sensitive to MAGI. The enhanced ACA subsidies are still in place this year (2025), but the math is unforgiving near cliff-ish ranges. After 65, Medicare’s IRMAA surcharges kick up in steps; a few dollars over can mean meaningfully higher Part B/D premiums two years later. So, choreograph conversions and gain harvesting around these thresholds. Open enrollment hits in Q4, which makes this the right season to tune income targets.

Quick reality check on markets while we’re at it: yields remain higher than the 2010s, so you may already have more interest income in taxable than you’re used to. That nudges you closer to bracket edges and can crowd out 0% capital gains room. Not fatal, just something to pencil in before you hit “convert.”

And about that extra work year, this is where people get tripped up. A single additional salary year can shift the whole conversion ladder to the right, exactly when Social Security and RMDs show up. That’s why I model a multi-year tax path, not just “how big is the refund this April.” You want a line of sight from now through age 75: when do conversions fit, what does AGI look like in the first RMD year, and how do ACA or IRMAA interact? If you retired earlier this year, great, you probably opened more runway. If you kept working, re-run the plan now.

My take (and I’ll happily be proven wrong by future tax law): the gap years are when small, boring moves compound. Convert just enough, harvest just enough, keep AGI in the zones that protect your healthcare math. It’s not flashy. It’s effective.

Bottom line: use the age-73 RMD clock to your advantage. Fill lower brackets with Roth conversions in low-income years, harvest gains in the 0% bracket when available (again, IRS 2024 thresholds: $94,050 MFJ / $47,025 single), start QCD habits at 70½, and keep a hawk’s eye on ACA and IRMAA cliffs. And if you worked this year, no worries, just resize the window and shift the sequencing. That’s real planning.

Healthcare bridge without blowing up premiums

Retiring before 65 is where the math gets spicy. The coverage choice and your income targeting matter as much, sometimes more, than your asset mix. I’ve sat with plenty of folks who nailed their allocation and then accidentally torched their ACA subsidy with a mistimed Roth conversion. It’s fixable, but it’s not fun.

COBRA vs. ACA, price it over a full year, not a quarter

COBRA often looks simple: keep your old plan for up to 18 months. But you pay the full employer cost plus up to 2% admin. The average total annual premium for employer family coverage was $23,968 in 2023 (KFF), with workers paying about $6,575 of that. After you retire, the employer subsidy is gone, so COBRA could run roughly $24,448 a year (102% of $23,968). That’s about $2,037/month. For single coverage, the 2023 average total premium was $8,435; COBRA would be near $8,604 a year. Price a full 12 months at these levels and compare to ACA, not just the first 90 days. Sticker shock fades when you annualize the options properly.

ACA subsidies are still enhanced through 2025

The American Rescue Plan (2021) removed the old 400% FPL cliff and capped benchmark silver premiums at no more than 8.5% of household income; the Inflation Reduction Act extended that through 2025. Translation: income management is premium management. As a reference point for 2025 plans, the 2024 HHS poverty guideline for a household of two is $20,440 (contiguous U.S.). With those rules, a couple targeting $60,000 MAGI could see a benchmark silver premium cap near 8.5%, about $5,100/year, before plan selection differences and local pricing. Your actual cost depends on county plans and ages, but the cap framework is what lets you plan.

Income targeting: MAGI controls your net premium

• Map MAGI month-by-month for the entire year, capital gains, Roth conversions, dividends, part-time wages, even those quirky muni-bond adjustments. If I say “MAGI” too much, sorry; it’s the number the ACA cares about.
• Batch conversions and asset sales in years you’re on employer coverage or Medicare. In bridge years on ACA, keep income in lanes that protect the subsidy. It’s not heroic; it’s just good blocking and tackling.
• Use the 0% capital gains bracket when available, but watch how realized gains ripple into ACA math.

HSA still pulls its weight

If you’re HSA-eligible this year, keep maxing it. For 2025, the HSA contribution limits are $4,300 self-only and $8,550 family, plus a $1,000 catch-up if you’re 55+. Treat it like a stealth IRA, pay current medical costs out-of-pocket, let the HSA grow, and reimburse yourself later with saved receipts. Yes, that’s legal. Keep tidy records; future-you will thank present-you.

Medicare timing and IRMAA

Turning 65 flips the board. Enroll on time, late Part B enrollment can trigger lifetime penalties, and COBRA isn’t considered active employer coverage for the Part B special enrollment rules. Part D has its own creditable coverage test; company retiree plans sometimes pass, COBRA sometimes does, but confirm. IRMAA (the Medicare surcharge) uses a two-year MAGI lookback: your 2025 Medicare premiums are based on 2023 MAGI. That can sting if you did a big conversion or asset sale two years ago. If your income dropped due to retirement, you can file an appeal (life-changing event). Do the paperwork; it works.

One more year? It’s not just salary, it’s insurance runway

Working one more year can mean employer coverage deep into 2026, shrinking the number of ACA months and reducing how aggressively you need to suppress income. Earlier this year I told a client to delay a $120k Roth conversion until they were back on employer coverage for 8 months; same 22% bracket, but avoiding an ACA subsidy collapse saved them ~$7k net. Yea, boring planning beat clever investing, again.

How I’d frame the decision

1. Price COBRA for 12 months at 102% of the total premium. Put the number in writing.
2. Build two ACA scenarios: MAGI at your target (with subsidies) and MAGI after intended conversions/gains. Use the 8.5% cap math as a sanity check, then look at actual county plans.
3. Sequence conversions: bigger moves in employer-coverage or Medicare years; smaller, controlled moves in ACA years.
4. Max HSA in 2025 if eligible, pay current costs cash, reimburse later.
5. Work back from Medicare start: coordinate ACA end date, avoid overlap, and review IRMAA brackets with the 2-year lookback in mind.

Personal rule of thumb: healthcare is the fulcrum of early retirement. Get the premium math right first; then fit the conversion and withdrawal plan around it. Not perfect, but it’s reliable.

So… retire now or wait a year? A simple decision grid

Keep it boring and binary. Read straight across and circle left or right. If most answers lean left, you’ve got permission to go. If they lean right, give yourself 12 more months and re-check next fall during open enrollment.

• Retire now if your planned spending is fully funded at a realistic withdrawal rate (think 3.5%-4.0% given current yields and equity volatility this year), and healthcare is solved without hand-waving. That means COBRA priced at 102% of the total premium for 18 months or a vetted ACA plan with the benchmark premium capped at 8.5% of household income under the current rules through 2025. Also: your tax map is drawn, Roth conversions, capital gains, and the ACA cliff are modeled, and no surprise IRMAA exposure when Medicare hits, given the two-year lookback.
• Work 12 more months if you’re short on guaranteed income (pension/annuity/SS) relative to your must-have expenses, sequence risk keeps you up at night, or that extra year materially bumps a pension or lets you delay Social Security, while also shrinking ACA exposure by keeping Modified AGI inside a lower subsidy band. That last piece matters, one client’s 2025 ACA subsidy held because we kept MAGI below the band; pushing a conversion $12k higher would have cost them most of the credit.

Run the math like a CFO, not a dreamer

1. Build a 10-year cash flow with month-by-month taxes. Include: federal brackets, state tax, NIIT if applicable, ACA premium credits under the 8.5% benchmark cap, and IRMAA scenarios for Medicare using the 2-year lookback. If the plan only works with perfect markets, it… doesn’t work.
2. Stress test sequence risk: haircut equities by 15-20% in year one and hold flat for two years; see if the plan still breathes. Not elegant, but it catches the obvious, bear markets don’t book meetings before they arrive.
3. Pin healthcare: COBRA at 102% in writing, plus two ACA quotes at your target MAGI and at +$15k MAGI (to see where the subsidy starts peeling off). The ACA through 2025 still uses the income-based cap structure, but county plan pricing this Q4 is drifting, don’t assume last year’s network or deductible.

This year’s reality check

Markets are choppy again in Q4, rates aren’t back to the 0% era, and premiums are resetting during open enrollment. Re-check annually, especially this year, because pay, markets, and insurance pricing move. The answer isn’t permanent; it’s a snapshot. I’ve changed my own “go/no-go” twice after seeing a new premium sheet land in October and a bonus that wasn’t supposed to be a bonus, long story.

Same nest egg, two paths. If sleeping well requires one more year, that isn’t procrastination, that’s risk management.

• Green light: Retire now if: withdrawal rate ≤ ~4%; healthcare locked with ACA under the 8.5% cap or COBRA at 102%; tax plan avoids accidental IRMAA and keeps MAGI in the intended bands.
• Yellow light: Work 12 more months if: guaranteed income doesn’t cover “needs”; you’re uneasy about a bad first two years; or an extra year bumps pension/SS meaningfully and lowers ACA exposure. One year that adds, say, +$300/month pension and lets you delay SS? That compounds quietly, and it matters.

Bottom line, no heroics, just math and comfort. If most checks lean left, go. If they lean right, wait. And if it’s 50/50, be honest about your sleep. The spreadsheet is important; your blood pressure tomorrow morning is, too.

Frequently Asked Questions

Q: Is it better to work one more year if my 2025 income might hike my Medicare premiums in 2027?

A: Maybe, but do the math. One more year of pay can strengthen your plan and delay withdrawals, but higher 2025 MAGI could trigger IRMAA surcharges in 2027. Price it out: what’s the after-tax paycheck gain minus potential IRMAA vs. the benefit of delaying Social Security and avoiding a year of portfolio withdrawals. If IRMAA is a few hundred a month but your plan improves meaningfully, it’s often still worth it.

Q: What’s the difference between using COBRA and an ACA plan if I retire at 62 this year?

A: COBRA keeps your old employer plan for up to ~18 months, easy transition, but you pay the full premium plus up to 2% admin. ACA plans can be cheaper if you manage MAGI because enhanced credits are available through 2025, capping benchmark premiums around 8.5% of household income if you qualify. Tactically: if you’ll do Roth conversions or realize gains, COBRA avoids subsidy cliffs; if income will be low, ACA often wins on cost. Check your meds and doctors, network differences bite. Run both scenarios before you pull the plug.

Q: How do I decide when to claim Social Security if I’m on the fence about retiring now vs. next year?

A: Anchor on cash needs and longevity. Delaying from Full Retirement Age to 70 boosts your benefit about 8% per year, guaranteed, inflation-adjusted. If you retire now, you can bridge with part-time income or portfolio withdrawals; if you work one more year, you might both increase your earnings record and delay claiming. Quick rule: if you have decent health, other income to live on, and a spouse who could benefit from a higher survivor check, leaning toward delay is usually smart. Just coordinate taxes, claiming early can crowd your bracket with wages and RSU income in 2025.

Q: Should I worry about sequence risk if I retire into a choppy market, and how do I set withdrawals so I don’t blow up my plan?

A: Yes, early-retirement returns matter way more than average returns. Two practical moves. First, build a cash-and-bonds runway: 2-3 years of planned withdrawals in cash/short duration and another 3-5 in high-quality bonds. That buffers you from selling stocks after bad months. Second, use a guardrail policy instead of a fixed 4% forever. Example: start at, say, 3.8%-4.2%, raise spending only with inflation if portfolio stays within bands; cut 5%-10% if the portfolio drops below a threshold; give yourself a raise after strong years. Taxes matter, too. Fill lower tax brackets with Roth conversions in years you’re not working (this year if you retire now; next year if you work through 2025). Tap taxable accounts first for capital-gains control, then pre-tax to manage RMDs that begin at age 73, keep Roth for later years or legacy. And insurance: if retiring pre-65, watch ACA MAGI, capital gains and conversions can kill subsidies. If you work one more year, you reduce sequence risk simply by not withdrawing during a bad stretch. Not sexy, but very effective.

@article{retire-now-or-work-one-more-year-2025-decision-guide,
    title   = {Retire Now or Work One More Year? 2025 Decision Guide},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/retire-now-or-one-more-year/}
}