FREE NEWSLETTER
We have reached a point now we don’t need to use either free or paid tools or calculators for things like, figure when to claim social security, we have converted all our t-IRA accounts, so no RMD, nor NIIT, nor IRMAA. We have also done our estate planning and a letter of instruction, etc. We did very well with our budgeting with our spreadsheets. All that is left to figure out annually are our annual retirement cash flow/income, and an estimation for coming year tax liabilities. Our question is what do you use to estimate both? Thanks in advance for any input and insights.
Achnk53, don’t say ‘spreadsheet’, you’ll only encourage RDQ 😁. Seriously, your past planning has landed you in a great place.
You didn’t say what your other income consisted of. People with only non-taxable IRA distributions and Social Security income would not have any tax concerns.
Cash flow? I am aware of our fixed income and IRA distributions, and what we spend. The former is significantly more the latter. Life is good.
Regarding withholding, I don’t care for tax calculators, my way is much faster. I want to avoid a penalty, so as long as I’m within 90% of liability, I’m happy. If I know I will have significantly more income going forward, I’ll open last year’s tax return and pop in the approximate increase (as interest), then compare the tax to my current withholding. I will schedule estimates if needed. (I could just multiply the increased income by my marginal tax rate of 12%, but this wouldn’t tell me the effect on the taxable portion of my Social Security)
Additional calculations would violate my KISS philosophy.
What is left is 2 large taxable in brokerage accounts earmarked for legacy, and LTC.Plus 2 large Roth accounts. so instead of try to figure out estimate taxes or to 110%, I just make a Roth distribution in mid December and do a withholding for federal and state taxes.
Got it. I think you’ve done a great job minimizing your tax exposure.
Isn’t it even simpler to pay 100% (or 110%) of the previous year’s tax? I take my RMD near the end of the year, and make sure the additional withholding will get me there.