Adjusting Withholdings

[westbranch]

My TIAA retirement portfolio does not have IRAs. So in order to rollover I would have to first have the ability to create an IRA account.

What we are both saying is that you are reading the IRS website wrong. Contribution and rollover are two separate things. You can create a rollover IRA account when you are no longer working. There are literally millions of retired people doing it every year. I work in this area and see it first hand all the time.

Rollover IRA | Simplify Your Retirement Savings | Fidelity Investments

Discover the wide range of investment options, support, and guidance needed in choosing which Fidelity Rollover IRA is right for you.

www.fidelity.com

 

[AlaskaHunter]

What we are both saying is that you are reading the IRS website wrong. Contribution and rollover are two separate things. You can create a rollover IRA account when you are no longer working. There are literally millions of retired people doing it every year. I work in this area and see it first hand all the time.

Rollover IRA | Simplify Your Retirement Savings | Fidelity Investments

Discover the wide range of investment options, support, and guidance needed in choosing which Fidelity Rollover IRA is right for you.

www.fidelity.com

But according to the IRS website, the mandatory withholding is 20%:
Topic No. 413 Rollovers From Retirement Plans:
Withholding
"Any taxable eligible rollover distribution paid to you from an employer-sponsored retirement plan is subject to a mandatory income tax withholding of 20%, even if you intend to roll it over later. "

 

[westbranch]

But according to the IRS website, the mandatory withholding is 20%:
Topic No. 413 Rollovers From Retirement Plans:
Withholding
"Any taxable eligible rollover distribution paid to you from an employer-sponsored retirement plan is subject to a mandatory income tax withholding of 20%, even if you intend to roll it over later. "

No withholding if it is a direct rollover. They send directly to new IRA.

Rollovers of retirement plan and IRA distributions | Internal Revenue Service

Find out how and when to roll over your retirement plan or IRA to another retirement plan or IRA. Review a chart of allowable rollover transactions.

www.irs.gov

 

[AlaskaHunter]

No withholding if it is a direct rollover. They send directly to new IRA.

Rollovers of retirement plan and IRA distributions | Internal Revenue Service

Find out how and when to roll over your retirement plan or IRA to another retirement plan or IRA. Review a chart of allowable rollover transactions.

www.irs.gov

Thanks.
So to minimize federal withholding (20% in 401K),
first rollover to an IRA and withholding could be as low as 0%,
with most IRAs using 10% as the default withholding.

 

[westbranch]

Thanks.
So to minimize federal withholding (20% in 401K),
first rollover to an IRA and withholding could be as low as 0%,
with most IRAs using 10% as the default withholding.

Yep. Based on the numbers you're talking about you may want to look into Roth conversions.

 

[Mountain Man]

Taxes are not my forte, so hopefully someone can shed some light on this for me...

How many of you adjust your withholdings to get as close to zero as possible come tax time? My wife and I have always received a pretty good refund, but I'm open to the idea of changing things up. Honestly, it won't make a difference either way, but I'd rather think about money now, instead of watching the ball drop in NYC...

Facts:

Married Filing Jointly - wife is a stay-at-home-mom
Three kids (ages nine, seven, and four)
Generally use the standard deduction
Annual income of 175k

If you have predictable income I definitely recommend you adjust tax withholding with a goal of owing a few hundred dollars come tax filing. This helps you with investing the amount you are currently loaning the government for 0% interest.

 

[CPAjeff]

Yeah it was supposed to be a joke. Just thought it was funny.

I thought it was pretty funny!!

I took the minimum required tax classes in my undergrad and grad programs as possible, thinking that doing taxes was strictly for nerds…