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Why You Should Never Pursue DTE Energy Retirement in Q3

Why You Should Never Pursue DTE Energy Retirement in Q3

April 26, 2024

Ah, retirement. You may have been dreaming of your DTE Energy retirement plan since you first joined the team. But while you may have had the year picked out, have you ever considered the exact day? Failing to time your retirement strategically could leave money on the table. Here’s why you should never retire in the third quarter from DTE Energy—and what you might consider instead.

Your Pension

To receive your fullest pension, you’ll need to wait to retire after the third quarter. Here’s why you should consider delaying your DTE Energy retirement.

Your pension is calculated based on your best final average compensation (FAC). If you get a raise during your retirement year, you won’t see your highest pension unless your total annual wages exceed those of the three highest previous years. 

Retiring in the third quarter would be too early for this to happen. By waiting until November or December, you’ll see the highest value for your pension.

Social Security Wage Tax

As you know, Social Security taxes are withheld from every paycheck. However, there is an SS wage limit that stops your income from being taxed for Social Security once you hit $168,000 for the year. For most workers, this won’t happen until the fourth quarter. By delaying retirement until the fourth quarter, you’ll retain more of your base pay each paycheck.

Paid Leave Payouts

The SS wage limit has a secondary implication for those seeking payouts for unused leave. That is, if you retire early enough that you don’t hit the wage limit, any compensation you receive for your remaining leave time can be taxed. If you delay retirement until the fourth quarter, you’ll have a greater chance of hitting your Social Security wage tax limit. This can allow you to keep a larger portion of the income from your paid leave. 

Another option is to use your deferred vacation time during the final weeks of the year. You wouldn’t be working, but you could still draw a paycheck after meeting these thresholds. 

If you choose to take a payout, take caution: You must accept your leave payout by December 31. If you delay retirement too long, your HR department may not have time to complete this transaction. You should speak with the DTE Energy HR department to help you get the timing right.

Tax Planning

You may want to schedule your DTE Energy retirement for early in the year. That way, your annual compensation could be lower than if you worked all year. While you’ll earn less money, your tax liability may be lower than if you had retired in November or December.

This is especially true if you plan on completing a Roth IRA conversion during your retirement year. Having a lower total annual income can prevent you from being pushed into a higher tax bracket.

Retirement Contributions

This may sound obvious, but delaying your retirement as long as possible can give you more time to contribute money to your pre-tax retirement accounts, such as your 401(k). This can help you save as much money as possible while reducing your tax liability.

Additionally, DTE Energy offers matching 401(k) contributions. Delaying retirement may allow you to take fullest advantage of these benefits so you can accumulate just a bit more wealth before your DTE Energy retirement.

DTE Energy Retirement: Your Next Steps

Don’t forget your own plans in choosing when to retire! Retiring during the third quarter might not make sense, depending on your exact retirement goals. Delaying until the late fall might help you plan for your retirement years in the following calendar year.

For example, if you plan to relocate during retirement, waiting a bit longer can put you in a better position to get your assets ready and start looking for a home in the early spring. You may discover that by retiring in the third quarter, your post-retirement prospects are not as immediately inviting.

Preparing for Retirement

Retirement is a big step. Are you ready for it? 

CWM Financial can help you prepare for retirement from DTE Energy. Contact us today by calling (248) 220-4321 or emailing robert@cwmfinancial.net. You can also schedule a meeting by visiting www.calendly.com/cwmrob/initial.

About Rob

Robert Moore is senior partner, financial planner, investment advisor, and co-owner of CWM Financial, an independent, fee-based wealth management company based in Troy, MI. With over 20 years of experience, Rob provides customized advice and solutions that are in the clients’ best interest. He strives to always go above and beyond his clients’ expectations, helping them retire with more security than they had before, and invest their time and energy in what’s most important to them. Rob specializes in working with DTE Energy employees, helping them maximize their benefits so they can reduce taxes, prepare for retirement, and protect their families through a comprehensive planning process. Rob graduated from Michigan State University and holds the CERTIFIED FINANCIAL PLANNER™ and Chartered Financial Consultant® (ChFC®) certifications.

Rob is known as a diehard family man who enjoys spending time with his beautiful wife, Jill, his daughter, Brookelyn, and his son, Brayden. When he’s not working, you can find him playing basketball once a week, squeezing in a round of golf, and watching college football and basketball with friends and family. He is passionate about enriching the lives of others through his church involvement and service at a community addiction program. Learn more about Rob by connecting with him on LinkedIn.