I usually start setting up for the next years’ financial considerations in late November which was the case this past (2023) November. I have a spreadsheet that I have developed (and continue to develop as things are dynamic to an extent) which allows me to do several things to manage our money:
- Forecast Gross Income
- Forecast IRA Required Minimum Distribution (RMD)
- Forecast Federal Tax Withholding Rate
- Forecast Taxable Portion of Social Security Income
- Forecast IRS Adjusted Gross Income
- Forecast Effective IRS Tax Rate Percentage
- Forecasts for Dividends, Capital Gains, etc.
The year-end use of this tool allowed me to prepare our 2023 IRS Tax in advance of the receipt of tax forms from financial institutions, etc. It also allowed me to forecast (to within a penny, as it turns out) the amount of my IRA that I must take as a distribution in 2024.
Inputs to the spreadsheet come from several sources. Forecast income numbers come from pension plans, investment brokerages and the Social Security Administration. These turn out to be actual numbers while other income items are based on past experience with the sources and our knowledge of how those numbers are likely to increase (or decrease). The latter aren’t usually nailed down until the end of the year.
The first important item that I calculate from the tool is the RMD forecast which allows me to set up the distribution schedule and amounts for my IRA. It also allows me to set the Federal Withholding amount for the coming year.
The second important item would be is to use the numbers from last year to prepare our 2023 IRS Income Tax in advance of receipt of the 1099-R and other IRS forms. We’re pretty confident that we know the approximate amount of our tax refund which we expect to get back from the .gov in February. As usual, it seems to be a relatively small refund which means we didn’t allow the Fed to enjoy having a lot of our money interest free for the year.