Retirees Face April Tax Bills as Social Security Withholds 0% Without Election
Updated
Updated · Yahoo Finance · Sep 14
Retirees Face April Tax Bills as Social Security Withholds 0% Without Election
3 articles · Updated · Yahoo Finance · Sep 14
Summary
First-year retirees can get hit with an April IRS bill because retirement income often arrives with little or no federal tax withheld during the year.
IRA and workplace-plan withdrawals let savers waive withholding, while Social Security withholds 0% unless retirees file an election; missing quarterly estimated payments can also trigger underpayment penalties.
One IRS rule offers a fix: withholding added late in the year is treated as if it were paid evenly across all four quarters, making it more forgiving than uneven estimated payments.
The report points retirees to three ETFs for cash-flow planning—VTEB for federally tax-exempt monthly income, SHV as a near-cash reserve yielding about 4%, and XYLD for roughly $4 a share in annual covered-call income.