Withholding for IRA withdrawals

[pugmom]

This is the first year that DH and I have had 1) full SS and 2) a large amount of IRA withdrawals. I just did the taxes with Turbo-tax, and we have a $6000 tax bill. This is because our monthly W/Ds from Fidelity only withhold 10%. This was my bone-headed mistake, but as I said, this is the first year where we really dipped into IRA money.


Going forward, and keeping it as simple as possible (I have been reading other threads about how others do this), would I be safe in setting the IRA withdrawal withholding rate (via Fidelity) to our tax bracket rate, which is 22% [low end, about $98000] ?
This would assume that our total W/Ds would be about the same, and that taxes did not increase too much.

Apologies in advance, as I am not as knowledgeable as many are here.

 

[OldShooter]

Simplest thing is to forget the withholding, the calculations, and the brackets and just take one tIRA distribution at the end of the year to bring your total tax payments to the safe harbor* amount. Lots of threads here endlessly discussing this tactic. Doing it this way means you don't have to guess whether a home-made withholding strategy is safe or not.

*https://www.hrblock.com/tax-center/irs/tax-responsibilities/avoiding-underpayment-tax-penalty/

 

[pb4uski]

This is the first year that DH and I have had 1) full SS and 2) a large amount of IRA withdrawals. I just did the taxes with Turbo-tax, and we have a $6000 tax bill. This is because our monthly W/Ds from Fidelity only withhold 10%. This was my bone-headed mistake, but as I said, this is the first year where we really dipped into IRA money.


Going forward, and keeping it as simple as possible (I have been reading other threads about how others do this), would I be safe in setting the IRA withdrawal withholding rate (via Fidelity) to our tax bracket rate, which is 22% [low end, about $98000] ?
This would assume that our total W/Ds would be about the same, and that taxes did not increase too much.

Apologies in advance, as I am not as knowledgeable as many are here.

You need to look at your overall rate and not the tax bracket (22% in your case).

It sounds like you have a reasonably set amount of tIRA withdrawals in mind for 2024. If so, I would use the What-If Worksheet in Turbo tax to estimate your full year 2024 taxes. Let's say it is $10k. The reduce the $10k by YTD withholdings. Divide that result by your remaining tIRA withdrawals for the year and that will give you a withholding rate for the remaining withdrawals.

I would round down as it is IMO better to owe a little than get a small refund.

 

[Retiired]

Yes, "How to Fail........" is an awesome book for young (and old) people. Don't let people's perceptions of the author prevent you from sharing the strong life lessons found in the book.