You only have to file/pay quarterly if taxes are not withheld, right? Taxes are withheld on my pension and I plan to have them withheld when we start withdrawing the deferred comp accounts.
You can also withhold taxes on Social Security payments, which I do. Saves a lot of pain at tax time.
It’s easy. @squeegee has mixed up a few things.
There is a form 1040-ES (for EStimated taxes) that you use to pay your qaurterly installments. they’re due Apr 15th, Jun 15th, Sep 15th, and Jan 15th. Which you will notice are not every 3 months; the IRS has some funny ideas about what a “quarter” is.
You can get the form and instructions from the IRS website. They’re very easy. Do the math, guess how much to pay, write a check, and mail it in with the 1040-ES.
If you blow all that off, you’ll owe a year’s worth of taxes next Apr 15th with your return. There are interest and penalties associated with doing that, but the truth is they’re minor enough that if you were totally paperwork allergic you could do that and probably only cost yourself a dinner or two out.
It’s easy enough to take a WAG at your total taxable income & taxes for the year, divide by 4, and send that in with each of the 4 payments.
This isn’t hard. If you’re over, you get a refund. if you’re short, you owe a lump come Apr 15th. And once you’ve done this your first full retired year you’ll have good baseline for how to estimate more accurately for next year.
Don’t sweat it. There’s really no wrong answer.
You don’t mention how you receive your income. Whatever that may be, you can arrange to have taxes withdrawn from each of your payments.
Right now our income is limited to my pension, my spouse’s SS, and my spouse’s part-time job. Taxes are withheld from each of these checks/direct deposits.
mmm
Not that your advice isn’t good, but I don’t see that I mixed up anything. If I’m going to file using Turbo, they fill out the ES form for me. OK, my notion that the estimate from 2 years taxes not 1 was wrong, I’ll give you that.
Yeah. I overdid the criticism. Sorry. I was hurrying and didn’t go back to soften my statement.
The fact is that we’re required to file quarterlies and/or withhold (ref @Mean_Mr.Mustard’s example) every year sufficient funds to cover your total tax liability. Failure to do that exposes you to interest and penalties for under-withholding. Which penalties and interest are in general no big deal unless someone makes a gross error.
As a rough measure of penalties and interest, a few years ago I goofed on my planning and owed the IRS ~$10K when I filed my return. Oops. The penalties and interest came to IIRC $200. Whether I sent them a check for 10,000 or 10,200 really didn’t much matter. The point being one should not fear that under-withholding a bit will either bankrupt you with penalties, nor summon the crack IRS SWAT Team to break down your door at midnight.
There are “safe harbor” provisions that as long as you withhold and/or pay quarterlies equal to 90% of your estimated taxes for this year, or 100% of your actual taxes from last year, you’ll be immune from penalties and interest. Which works great in a situation where your income is steady from year to year or is slightly increasing every year. But doing the “100% of last year” thing would represent making massive over-payments in the year someone retires and their taxable income plummets. Or even the year after they retired, depending on when in the year they did that.
I’m in that boat for 2024. I retired late enough in 2023 that my wage withholding will get me close enough for all of my 2023 taxes owed. Come April I’ll send them whatever the shortfall turns out to be, which won’t be much.
But for 2024 I’m going to have to rough out my expected income & therefore taxes, then do the quarterly payments aiming to get above the [90% of 2024’s actual taxes] threshold. And be subject to (minor) penalties and interest if I don’t quite meet that threshold.
There are additional complexities via Form 2210 (“income annualization”) for people whose income is not evenly distributed around the year.
For many retirees, including me, a hefty fraction of their total taxable income will occur in Dec of every year. By fiddling with Form 2210 (and Schedule AI) to break their income down into the 4 “quarters” (scare quotes because they aren’t all 3 months long) they can make smaller payments in the first 3 “quarters” and then a bigger final payment to make up the difference. Which results in loaning the Treasury less money over time.
I’ll bet it does! Thanks for the tip - I had no idea that was a thing, but I’m going to take advantage of it, now that I know. I’ll start collecting in March, when I turn 70.
We receive income from both Social Security and our IRAs which we hold at Schwab. From both of these we have set up withholding for taxes which represent our best guess on how much we’ll owe.
But I still need to noodge Mr. brown to start looking into this so we don’t get a nasty surprise despite the withholding.
Take a look at the tax brackets and see what applies to you.
If you can keep your adjusted gross income less thank 70k-ish, you will be in the 12% bracket.
Also, this will change in 2026 (so you’ll have to take that into account in January 2025 when you plan your financial year, unless Congress does something about it before then).
I believe all this is correct, but please verify for your own situation.
mmm
Unfortunately, this cannot be done online, which I had mistakenly assumed. You have to download the W-4V form, fill it out, and mail it to your local SS office. As I recall, it didn’t take long to take effect, but you may want to do this as soon as you get your first check.
Here’s the link to the form:
Also, if you don’t already have an account on the SS website, you should create one ASAP.
Thanks for the info and the link to the form!
I do already have an account on the Social Security website, so at least that’s taken care of.
I believe that you get a break if you screw up once although maybe that’s changed. In the late ‘90s I got a big windfall early in the year and I put the whole thing in a relatively high interest rate vehicle. I paid a big amount of taxes in April but the fines were waived. A girlfriend of mine had a similar situation in the late ‘00s.
For many people the fines, which as you said aren’t that horrible, are a cost of doing business. They pay them every year in exchange for having utilization of that cash during the year.
Yesterday I made myself sit down and sort through all of the Social Security/Medicare/Medigap/IRMAA/401(k) rollover/mortgage payoff paperwork that had accumulated since we both retired back in May. The pile was considerable, and I created and organized paper folders to contain it all until we deem it is no longer necessary to retain it. Most of the paperwork documents all the work and fussing and exchanges I had with various government and financial people over the past several months.
So it triggered an uneasy dream last night that I was back at work and trying to organize legal paperwork and files. I was a legal secretary, so this was basically my job. In the dream, I couldn’t make sense of anything I was handling and I started to get panicky. Then I woke up gasping. Gad, I’m glad I’m retired and don’t have to do that anymore.
You’re a few months ahead of me, but yeah, there is a lot of paperwork associated with the transition. And much of my longstanding filing systems, be they paper or computer folders, don’t quite fit the new reality.
I’ve been mostly just accumulating all the stuff in a single chronological pile as you have, and awaiting the final settling of my work-related affairs, which occurs in January. I might have prefered that to end in Dec so I could have started 2024 “clean” and with a fresh filing system designed around the new rhythm of emails, stuff to download, and snail mail.
I figure about Feb or March 2024 it’ll be time to settle my new arrangement; we’ll have gone through one year end and all the SS & Medicare / medigap changeover crap once, so have some idea what to expect in the 24/25 transition. If that leaves a couple of work-related folders sitting until the end of 2024, OK.
Best of luck on avoiding sweat-soaked wakeups over your files. 
Although I’ve been retired for two years now (two years!! Time flies, etc.), and I learned about Medicare when my spouse went on it, both of us have yet to deal with Social Security. I think we should probably see if we can set up a joint appointment with someone, since what he does will probably affect my benefits as well. I’ve been told conflicting things about what effect, if any, my teensy school pension will have on my ability to collect SS benefits. I’ve also heard different things about what effect the age at which an older and higher-earning spouse files for benefits has on spousal benefits later.
Maybe I should concentrate on getting all the Medicare paperwork filled for now.
When I met in person with an SS rep I was pleasantly surprised at how painless it was.
Note that they can give only factual answers, they cannot advise.
In other words, they are FQ, not IMHO (and certainly not GD).
mmm
I only know what we ended up doing with similar issues. My wife, the lower income earner, began collecting SS shortly after turning 62, as she’d stopped working by that time. She didn’t get much, but it was a nice little bonus. Then when I applied for SS and was approved, her SS checks immediately went up to becoming half of what mine were (and mine were based on 35 years of earnings above the SS maximum).
I applied at 65.5 years, because while waiting would have resulted in getting larger SS checks, I was retired and wouldn’t break even until I was in my mid 80’s if I delayed. And with my health I expect maybe 15 more years if I’m lucky.
As for pension, getting my pension didn’t impact my SS benefits at all.
Again that’s just me, I claim no expertise on these topics.
It is worth noting that spousal benefits, which are 50% of the higher earner, are calculated on the amount that would be paid to the higher earner at normal retirement age. So, if Qadgop had waited until he was 70, Ms. Qadgop’s benefits would NOT have increased, but she still could not draw the spousal benefit until Qadgop started drawing his benefit.
It’s really helpful to hear about the experiences of other people who have gone through the process! My husband will be 67 this month and I’m 62.5 (it’s kind of fun that we go back to counting months at this end of our lives, just like at the beginning). He’s still working half-time, despite his best efforts to back away, and the business returns enough in dividends that we don’t have to dip into savings yet. But he’s worked since he was 16 years old, his life expectancy shortened dramatically two years ago, and I think he’d get a lot of satisfaction in seeing some return on the money he paid into the system. At the same time, he wants to be sure that I’m getting the highest spousal (and later, if it shakes out that way, survivor) benefits possible. Bottom line is that we should arrange that appointment. It sounds like getting through on the phone is the hardest part.
And although time does fly, I’ve only been retired a little more than a year! I’ve just enjoyed it so much it feels like more (and I apparently still think in terms of school years).
ETA: Railer13’s reply got in while I was posting - looks like he should be filing soon! If my benefit wouldn’t go up, there’s no point in him delaying the satisfaction of seeing a government check (well, direct deposit, but we can imagine).