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

Ready For Retirement

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, withdrawals from pre-tax accounts, pensions, and brokerage accounts are taxed, and he explains how and when to make estimated tax payments to the IRS.
Questions answered:
What is the Safe Harbor Rule and how is it relevant to estimated taxes?
Is all income in retirement taxed the same?
Timestamps:
0:00 - David’s question
2:09 - Estimated tax payment options
5:28 - Back to David’s question
7:48 - Types of income – SS
11:02 - Pre-tax retirement accounts
13:53 - Average vs marginal tax rate
15:50 - Pensions
17:26 - Brokerage accounts
21:20 - How to make estimated tax payments
23:23 - Other considerations

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Chapters

1. Estimating Taxes in Retirement (00:00:00)

2. Understanding Tax Withholding for Retirement (00:11:52)

3. Understanding Retirement Tax Payments (00:18:15)

4. Consulting Financial Professionals Before Investing (00:26:02)