What percentage should I withhold for taxes when taking money from my IRA?
Hey everyone, I just hit retirement age last month and I'm planning to set up regular withdrawals from my IRA at Fidelity. I'm trying to figure out the right amount to withhold for taxes. Right now, Fidelity has the default set at 10% for federal tax withholding, but I'm not sure if that's enough (or maybe too much?). I don't want to end up owing a bunch at tax time, but also don't want to have too much tied up if I don't need to. Has anyone dealt with this before? Is 10% typically enough or should I adjust it? I've never had to manage withdrawals before so this is all new territory for me. Thanks!
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Skylar Neal
Congrats on your retirement! The correct withholding percentage for IRA withdrawals depends on your overall tax situation, not just a standard rate. The 10% default at Fidelity is just that - a default, not necessarily the right amount for you. Traditional IRA withdrawals are taxed as ordinary income, so you should withhold based on what tax bracket you expect to be in during retirement. If you'll have other income sources (Social Security, part-time work, pension), your total income could push you into a higher bracket. The federal tax brackets for 2025 range from 10% to 37%. Many retirees find withholding their expected tax bracket percentage works well - so if you expect to be in the 22% bracket, withhold 22%. You might also want to consider state tax withholding if your state taxes retirement income.
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Vincent Bimbach
•Thanks for this explanation! I'm about 3 years from retirement and starting to plan. Question - does it make more sense to withhold from each distribution or just make quarterly estimated tax payments instead? And do you need to withhold for state taxes separately or can you just handle that at tax time?
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Skylar Neal
•For your first question, either approach can work - withholding from distributions or making quarterly payments. Withholding is often simpler because it's automatic and the IRS treats withholding as occurring evenly throughout the year even if you take a large distribution late in the year. Quarterly payments require more active management and specific timing. Regarding state taxes, it depends on your state and your overall tax situation. Many people do withhold for state taxes from their distributions to avoid a surprise bill. Some states don't tax retirement income at all, while others follow federal rules or have their own exemptions. I'd recommend checking your specific state's rules on taxing retirement distributions.
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Kelsey Chin
I was struggling with exactly this issue last year when I started my IRA withdrawals. After getting some conflicting advice, I discovered this amazing AI tool called taxr.ai (https://taxr.ai) that analyzed my specific situation and recommended the right withholding percentage. It looks at your other income sources, deductions, filing status, and state to calculate a personalized withholding rate. In my case, the default 10% wasn't enough because I was still getting pension income and some consulting work. The tool showed me I should be withholding closer to 18% to avoid owing at tax time. You can upload previous returns and it makes projections based on your actual tax history.
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Norah Quay
•Does it actually give you specific withholding advice? I've used some tax calculators before but they just gave general estimates, not actionable recommendations. How accurate was it compared to what you actually ended up owing?
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Leo McDonald
•I'm a bit skeptical of these online tools. How does it handle things like RMDs when you turn 73? And does it factor in state taxes too? My state taxes retirement income differently than the feds.
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Kelsey Chin
•The tool does provide specific withholding recommendations - it gave me an exact percentage to withhold based on my projected annual income and deductions. For me, it was incredibly accurate - I ended up with a small refund of around $240 rather than owing thousands like the previous year. It definitely handles RMDs and has a specific calculator for those requirements as you age. It factors in both federal and state taxes, with specific modules for different state tax rules. It knew exactly how my state (Minnesota) treats retirement income, which has some exemptions that the federal doesn't recognize.
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Leo McDonald
Just wanted to follow up about taxr.ai that I mentioned earlier - I decided to try it despite my skepticism. I'm actually really impressed! It analyzed my last year's return and projected my income for this year (including Social Security starting in August). It recommended I withhold 15% rather than the 10% default, and explained it was because of my rental income pushing me into a higher bracket. The state tax calculation was spot on too - it knew about my state's specific retirement income exemption that applies to the first $12,500 of distributions. Saved me from having to dig through the state tax code myself. Totally worth checking out if you're trying to nail down your withholding percentage.
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Jessica Nolan
If you're having trouble getting clear answers about your withholding or need to ask specific questions about your IRA situation, I highly recommend using Claimyr (https://claimyr.com) to actually get through to an IRS agent. I wasted HOURS on hold trying to clarify my withholding requirements last year before I found this service. They have this system where they wait on hold with the IRS for you, then call you when an agent is on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was connected with an actual IRS rep in about 40 minutes instead of the 3+ hours I spent on previous attempts. The agent was able to walk me through exactly how to calculate the right withholding percentage based on my specific situation with multiple income sources.
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Angelina Farar
•How does this actually work? Do you have to give them personal information? Seems sketchy to have a third party connecting you to the IRS.
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Sebastián Stevens
•Yeah right. Nobody gets through to the IRS these days. I tried calling for WEEKS last tax season and never got anyone. If this actually worked, everyone would be using it. Sounds like a scam to me.
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Jessica Nolan
•You don't give them any sensitive personal information. The service just connects the call - they don't stay on the line during your conversation with the IRS. You provide your phone number, and they call you when they've gotten through the IRS queue. It's basically just a call connection service that waits on hold so you don't have to. I completely understand the skepticism. I felt the same way after wasting so many hours on hold. But it genuinely works - they use a system that keeps your place in line without you having to stay on the phone. Once they reach an agent, they connect you directly. The IRS doesn't even know you used a service to get through, they just think you waited on hold like everyone else.
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Sebastián Stevens
I have to eat my words about Claimyr. After posting my skeptical comment yesterday, I decided to try it just to prove it wouldn't work. Well, I was wrong. They actually got me through to an IRS representative in about 35 minutes (while I was making dinner, not sitting with a phone to my ear). The IRS agent reviewed my situation with multiple income sources (pension, IRA, and part-time consulting) and recommended I withhold 22% from my IRA distributions rather than the default 10%. She explained that my total income puts me in the 22% bracket, and withholding at that rate would likely prevent owing at tax time. I've been filing with an incorrect withholding percentage for two years now. No wonder I kept owing penalties! Sometimes being proven wrong is actually a good thing.
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Bethany Groves
Something else to consider - you might want to have different withholding amounts during different parts of the year. I do 15% withholding for the first half of the year, then reassess in July based on how my other income is tracking. Sometimes I adjust up or down for the second half. Also, don't forget that once you hit 73, you'll have Required Minimum Distributions (RMDs) that could push you into a higher bracket. Plan ahead for that if you're getting close to that age!
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KingKongZilla
•Can you actually change your withholding mid-year like that? I thought once you set it up, you had to stick with that percentage for the whole year. How do you adjust it with Fidelity specifically?
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Bethany Groves
•Yes, you can absolutely change your withholding percentage throughout the year! There's no rule that says you have to keep the same withholding rate. With Fidelity specifically, you just log into your account, go to the withdrawal section, and there's an option to update your tax withholding preferences. It takes effect on your next distribution. I've found this flexibility really helpful because my income varies throughout the year. Some years I have more capital gains in the second half, so I increase my IRA withholding to compensate. It's much better than getting surprised at tax time or having to make separate estimated payments.
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Rebecca Johnston
Has anyone used the IRS withholding calculator for this? I tried but it seems more designed for W-2 income than retirement accounts. Is there a better calculator specifically for retirees with IRA distributions?
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Nathan Dell
•The IRS Withholding Estimator isn't great for retirees. I've had better luck with some of the retirement-specific calculators from Schwab or Fidelity. They have options specifically for pension and IRA income that the IRS calculator doesn't handle well.
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Ryan Young
Brady, congratulations on reaching retirement! This is such an important question and you're smart to think about it upfront. I went through this exact same situation about 2 years ago when I started my IRA withdrawals. The 10% default is rarely the right amount for most people. What really matters is your total tax picture - not just the IRA withdrawal itself. You'll want to consider: 1. Your other retirement income (Social Security, pensions, part-time work) 2. Your filing status and standard deduction 3. Any other taxable income or capital gains 4. Your state's tax treatment of retirement income I ended up needing to withhold 20% because I had Social Security and some rental income that pushed me into a higher bracket than I expected. The key is to think about your total annual income, not just the IRA portion. One practical tip: Start conservative your first year. You can always adjust the withholding percentage for future distributions based on how your first tax season goes. It's better to get a refund than owe penalties for underpayment. Have you calculated what your total retirement income will be for the year? That's really the starting point for figuring out the right withholding rate.
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Zoe Alexopoulos
•This is really helpful advice, Ryan! I'm actually in a similar situation to Brady - just starting to think about retirement withdrawals. Your point about calculating total retirement income first makes a lot of sense. Quick question: when you mention starting conservative and adjusting later, how often can you actually change the withholding percentage? Can you do it monthly, quarterly, or is there a limit on how frequently you can adjust it? I'm worried about either over-withholding early in the year or under-withholding if my income changes mid-year. Also, did you find any good resources for estimating what your Social Security and other income will actually be? I'm having trouble getting accurate projections for planning purposes.
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