How to Estimate Your Tax Bill in Retirement (And How to Pay it)

Ready For Retirement

James Conole, CFP®

Investment Planning, Bonds, Education, Stocks, Cash, Business, Dividend Investing, Retirement Planning, Retirement, Investing, Tax Planning

5 • 706 Ratings

🗓️ 2 July 2024

⏱️ 27 minutes

🔗️ Recording | iTunes | RSS

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Summary

David has a question about taxes in retirement: When you’re retired and no longer getting a regular paycheck from which your employer withheld tax payments on your behalf, how do you estimate the taxes you’ll owe? To answer this question, it’s important to understand where income in retirement will be coming from and how that income is taxed. Once you have an idea of what you’ll owe, you need to make estimated tax payments throughout the year. James explains how Social Security,...

Transcript

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0:00.0	If you're retiring soon, you might be wondering how you need to go about making tax payments
0:03.6	once you do retire.
0:05.4	When you're working, it's simple enough.
0:07.0	You simply have your salary and payroll, most likely it will withhold most, if not all,
0:11.6	of any potential tax liability that you have due for that calendar year.
0:15.3	Well, when you retire, that salary goes away.
0:17.8	And when that salary goes away, so too do those withholdings.
0:20.2	So how do you go
0:21.1	about understanding how much you need to pay in taxes every year in retirement? And what's the best way to go
0:26.1	about having those taxes withheld so you don't get hit with any underpayment penalties? It's all coming up
0:30.8	next on today's episode of Ready for Retirement. This is another episode of Ready for Retirement.
0:38.2	I'm your host, James Cannell, and I'm here to teach you how to get the most of the life
0:41.4	with your money.
0:42.5	And now, on to the episode.
0:46.1	Today's topic comes directly from a listener question.
0:48.9	This listener's name is David, and David writes in this.
0:51.7	He says, could you do a video discussing paying taxes in retirement?
0:54.8	I have searched and I found a number of articles that discuss how much you pay, but none that
0:58.7	really lay out the process of estimating them and where specifically to send the money.
1:02.8	Can I do it all online? Do any tax prep programs help me. It would be especially useful to learn
1:07.4	about estimating taxes in the early years of retirement. I've seen a rule that says I
1:11.2	should estimate based on 110% of my taxes in the year before I retire, but my wife and I will be
	...

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