The IRS counts federal tax withheld from an RMD as paid evenly across all four quarters, letting a single December distribution erase a full year of missed estimated taxes. Retirees avoid underpayment penalties by withholding enough to cover 100% of last year's tax liability, or 110% if prior-year AGI exceeded $150,000. Custodians need one to three weeks to process large distributions, making mid-December the real deadline, not December 31.
Many financial professionals are salespeople paid on what they push, not whether you end up wealthier. A fiduciary is the opposite. The SEC legally requires them to put your interests first.
Advisor.com's free matching tool pairs you with vetted fiduciaries from major national firms, all in under three minutes. See who you match with today. The last few weeks of December present a specific tax opportunity for retirees who have fallen behind on quarterly estimated tax payments.
Federal income tax withheld from a retirement account distribution is treated by the IRS as having been paid evenly across all four quarters, no matter when in the year the withholding actually happened. That single quirk turns a December required minimum distribution into a tool for erasing an entire year of missed estimated taxes without triggering an underpayment penalty. More than it has in years, this strategy matters in the current environment.
The 10-year Treasury yield sits at 4.70%, near the top of its range, with a trailing-year percentile rank of 98. Higher yields mean IRS underpayment interest is higher too, so the cost of missing the safe harbor has gone up. At the same time, the personal savings rate has fallen from 6.2% in the first quarter of 2024 to 2.8% in the second quarter of 2026, leaving thinner buffers to absorb a surprise April tax bill.
Most Americans suspect they're behind on retirement and never find out. Advisor.com's free matching tool pairs you in about three minutes with a vetted fiduciary advisor who can help you with investing, taxes, retirement, estate planning, and more. Find out where you stand.
Extract — continue reading at the source.
