dealing with taxes on nestegg withdrawals?

[Accidental Retiree]

I calculate our safe harbor amount, 110% of last year's taxes -- both federal and state. In early December I then withdraw that amount from the IRAs with 100% withholding.*

Never a reason to estimate anything unless the safe harbor amount makes you unhappy. No reason to pay them prior to December if you can pay it as withholding from an IRA.

*Actually slightly less than 100% because Schwab won't do 100.0%. But close enough.

That’s what we do now, although. I’ve also withheld taxes from my pension.

 

[SecondCor521]

OP here.
I have had my 401K moved into my IRA. My plan is to start pulling from my IRA funds at Fidelity very soon now.

A few more questions ...

I plan to do some lumpy withdrawals. Can Fidelity do tax witholdings for me or, do I have to pay them myself to the IRS?

Also, can I make estimated tax payments anytime during the year or, do they have to be on a quarterly basis?

Thx.

Fidelity probably can do the withholding for you. You might even be able to set a percentage - say 17% or whatever you want.

You can make estimated tax payments any time during the year. Just keep good track for your records so you can reflect those payments on your tax return next year to get credit for making them.

 

[Montecfo]

OP here.
I have had my 401K moved into my IRA. My plan is to start pulling from my IRA funds at Fidelity very soon now.

A few more questions ...

I plan to do some lumpy withdrawals. Can Fidelity do tax witholdings for me or, do I have to pay them myself to the IRS?

Also, can I make estimated tax payments anytime during the year or, do they have to be on a quarterly basis?

Thx.

You can make them anytime, but for determining whether you are subject to a penalty, estimated tax payments are still bookkept in the quarterly regime i.e., April 15, June 15, Sept 15 and Jan 15

So if you made payments for example on January 23, March 11 and on April 15, all of those payments are considered first quarter estimated tax payments due by April 15, unless designated for a subsequent quarter.

 

[jazz4cash]

Yeah I think Fido is very flexible and can withhold for state as well as Federal. I think they’ll even go up to 90 or 100%. None of my credit union IRAs can do state withholding so I’m thinking of maybe using transfers to Fido before taking distributions but that’s been a problem too.

 

[txtig]

I usually have Fidelity withhold 20% from each of my IRA withdrawals. I live in Texas, so no state withholding to worry about.

I also have voluntary withholding from our social security payments.

 

[pb4uski]

I was just curious how folks like to manage taxes on tax-deferred fund withdrawals. Do you create witholdings and pay estimated taxes quarterly?
Just wait until end of year and pay a wopping chunk to IRS at tax time?
Can witholdings be set up automatically to be sent to IRS for withdrawals?

Most of our nestegg savings are tax deferred ... 401K, 403B, IRA. I am recently retired and we haven't yet touched savings but, envision doing so in the near future. I will have to figure out how best to reconcile the taxes.

What I do is estimate our total taxes for the year and adjust the withholding from my pension so that by the end of the year that an amount about equal to what I expect to owe will be withheld.

It is easier for me than making estimated payments.

In that past I have done a tIRA withdrawal in December with 99% of the amount withheld in lieu of making estimated payments since withholding are treated as being made evenly throughout the year even if they are done in December for underpayment penalty purposes.

 

[Done]

Fidelity lets you specify withholding percentages for Federal and State tax up to 99%. You can now do it from the mobile app under Transact > Transfer.

I try to do all of my withholding this way so I don’t need to bother with the timing of estimated tax payments. Withholding is considered received equally throughout the year, regardless of when it occurs.

 

[dtbach]

Other than this year, my income as been fairly stable so I figured out what % I have paid in the last few years, averaged it and then had that amount plus a couple of percent over.

 

[Finance Dave]

FIDO can do tax withholding, there is a dropdown box when you do the withdrawal...I think the default is 10%?

As for the quarterly dates, they are set by the IRS and are firm (except for rare instances like pandemic delay lol).

 

[albireo13]

Awesome. Thank you for the info.