Another quarterly estimated taxes question

[RetireBy90]

I am going to do this for this tax year (my first full year of retirement). It seems so much simpler than dealer with the quarterly estimated payments. But I may not do it in one fell swoop, maybe a couple of times during the year. For example, now is a good time for us as our tax-deferred has hit another peak. The big unknown is the end of year mutual fund capital gains, so we will be prepared for that.

My first full year of retirement also, and DW will get first SS check next week, and rental is paid off in couple months so income from that also, so lots of uncertainty for tax due in my house. I’ll yake a draw from my TIRA to get any taxes withheld this year.

Next year will also probably do the same as I get numbers for a full year.

 

[RobbieB]

I've been sending in the quarterly checks ever since I retired, just like Pops.

 

[audreyh1]

I guess we'd have to go to Alan S. for a credible answer but I'm not sure the yr end square is necessary, tho it would be cleaner. There is stuff like recharacterization of IRA contributions that can be done in the 2nd yr by deadline......you just have to include a narrative explaining what happened or perhaps some key words on the form.

btw.......I still do the quarterly payments like you despite my longing to do the withholding......don't understand why but it feels I'm more in control and not depending on somebody else to do things right.

For us, what it comes down to is that I don’t care to mess with our IRAs until RMD age unless we go through a low income year (market sell off, opportunities for tax loss harvesting), in which case I’ll definitely reevaluate doing a Roth conversion.

Unlike pb4uski (I assume), our tax deferred accounts are about 13% of our retirement assets, and it’s not clear that we would gain a noticeable tax advantage by converting any early.

 

[pb4uski]

For us, what it comes down to is that I don’t care to mess with our IRAs until RMD age unless we go through a low income year (market sell off, opportunities for tax loss harvesting), in which case I’ll definitely reevaluate doing a Roth conversion.

Unlike pb4uski (I assume), our tax deferred accounts are about 13% of our retirement assets, and it’s not clear that we would gain a noticeable tax advantage by converting any early.

Is your marginal tax rate now lower than it will be when you are RMD age?

 

[audreyh1]

Is your marginal tax rate now lower than it will be when you are RMD age?

Hmmm. Marginal tax rate - is dominated by cap gains/qualified dividend income in our case. So you could say it’s quite high as any Roth conversions just pushes our cap gains taxes higher plus the ordinary income tax. Plus we pay NIIT. I doubt we’d be able to do enough Roth conversions at a lower tax rate to avoid the torpedo anyway.

I’m focusing instead on reducing our cap gains distributions by moving to more tax efficient funds as tax considerations allow. Taking best advantage of lower cap gains rates now, which will vanish once we start drawing SS.

If we have a great market crash in the next 6 years, I’ll be able to accelerate this process dramatically, but I am very careful what I wish for!!! And of course tax loss harvesting continues to be an option past SS and RMDs, but if earlier it may help allow more in Roth conversions.

I did manage to get rid of some bad actors (funds that have been paying excessively high cap gains distributions) last year during the December market sell off. I wish I had done a little more but the recovery was very fast.

 

[marko]

I should, but don't pay estimateds.

I pay the penalty and the tax due the following April. Once and done with it.

 

[OldShooter]

... But I may not do it in one fell swoop, maybe a couple of times during the year. For example, now is a good time for us as our tax-deferred has hit another peak. ...

Well, you can sell without having to pay Uncle the proceeds right away. Put the money into t-bills or an MMF and pick up a few bucks between now and mid-December. Waiting until December doesn't have to be a bet on the equity market. We'll probably be making our December payment from the fixed income side of our AA.