I retired July 2020. We live comfortably on combined Social Security and two pensions.
In Aug 2021 I withdrew a large sum from my 401(k) to purchase a camper van. My wife is 3 years into an Alzheimer's diagnosis so we thought we should use some of those retirement funds while she can still enjoy and benefit.
In Nov 2021 we decided to move closer to family. We quickly sold our home at a good price but purchasing a replacement home in the new city was not going well--homes were $200K more expensive and selling FAST. We lost out on several homes to cash offers from other buyers, so decided we must make a cash offer to compete. In Dec 2021, I took a large 401(k) distribution to supplement the proceeds from our home sale and made a cash offer, which was accepted. We finalized the purchase in Jan 2022 and are comfortably settled in our home.
You probably have already guessed at my problem--those two large 401(k) distributions in 2021 bumped me up to a 35% Tax Rate on my 2021 tax return. Although I had withheld taxes for each of the distributions, I naively assumed a 22% rate. Now, TurboTax shows I under-withheld $35K in taxes. Ouch! I suspect I am just out of luck and will need a payment plan to recover. Any other suggestions?
