401K withdrawals

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I’m 60, single, and live in California. I withdrew $45,000 from my 401(k), with $4,500 federal and $450 CA withholding. How can I determine if I owe additional taxes or estimated payments?

M-MTax

Level 15

To determine if you owe additional taxes or need to make estimated payments, you must look at your total annual income—including wages, interest, and this $45,000 withdrawal—and map it against federal and California tax brackets.

Because you are 60 years old, you are over the 59½ threshold and will not owe the 10% early withdrawal penalty. However, the $45,000 counts entirely as ordinary taxable income. The initial 10% federal withholding ($4,500) and 1% California withholding ($450) you chose are often not enough to cover the actual tax bill once this money is layered on top of other earnings.

M-MTax

Level 15

Step 1: Calculate Your Federal Tax Exposure

As a single filer, your tax liability depends on where your total income falls after subtracting the standard deduction.

Your Withholding: You currently have 10% withheld ($4,500).
The Reality: The lowest federal tax brackets are 10% and 12%, but they quickly jump to 22%, 24%, and higher. If your total income (other income + $45,000 withdrawal) pushes you past the 12% bracket, the $4,500 you already paid will fall short.

Step 2: Calculate Your California Tax Exposure

California taxes 401(k) withdrawals as progressive ordinary income.

Your Withholding: You currently have 1% withheld ($450).
The Reality: California’s progressive tax rates span from 1% up to 13.3%. A 1% withholding rate is almost always a baseline under-withholding unless you have zero other income for the year.

Step 3: Check if You Must Pay Estimated Taxes

The IRS and the California Franchise Tax Board (FTB) require quarterly estimated payments only if your employer withholding doesn't cover your liability and you expect to owe a significant amount at tax time.

You can safely avoid underpayment penalties if you meet the "Safe Harbor" rules:

Federal Safe Harbor: You will not owe estimated payments or penalties if you owe less than $1,000 at tax time, or if your total 2026 withholding covers at least 90% of this year's tax or 100% of last year's tax liability (whichever is smaller).
California Safe Harbor: You generally avoid penalties if you owe less than $500 at tax time, or if your state withholding covers 80% of this year's tax or 100% of last year's tax.

Felix BlancoAuthor

Level 2

Thank you. Since my current income is considerably lower than in previous years, could you clarify how to calculate my 2026 federal and California estimated-tax safe harbors using my 2025 return? Also, California's 2026 instructions appear to specify 90%, rather than 80%. Does the timing of my retirement withdrawals affect potential underpayment penalties?

SwapnaM

Employee Tax Expert

Because you are 60 years old (over age 59½), you are fully exempt from early withdrawal penalties on both your federal and California state returns.

Assuming that this withdrawal is your only income & this was a pre-tax (Traditional) 401(k), the full $45,000 is ordinary income subject to federal and California state income taxes.

Federal Tax Outlook (Good News):

After applying your single standard deduction ($16,100), your federal tax liability is approximately $3,220.
Because you had $4,500 withheld for federal tax, your withholding is more than enough to cover what you owe. You likely do not need to make federal estimated payments.

California State Tax Outlook (Action Recommended):

California's standard deduction is much lower ($5,706), making your state taxable income about $39,294.
Your estimated California tax is approximately $970, but only $450 was withheld.
Expected Balance: You will likely owe around $500 to $550 to California when you file your tax return.

If you have additional income this year (W-2 wages prior to retiring, interest, dividends, or consulting income), it will stack on top of the $45,000 and push your federal marginal rate into the 22% bracket.

You can choose to pay the remaining $500 California balance when you file your taxes next spring, or you can submit an estimated payment voucher directly on the California Franchise Tax Board (FTB) website.

@Felix Blanco Thanks for the question!!

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Felix BlancoAuthor

Level 2

Thank you. I noticed California's announced 2026 standard deduction is $5,900, rather than $5,706, with a $158 personal exemption credit. Would this reduce your estimated CA liability? Also, does the timing of my withholding affect whether I need an estimated payment?

SwapnaM

Employee Tax Expert

Yes, it will change the numbers.

California's standard deduction is much lower ($5900), making your state taxable income about $39,100.
Your estimated California tax is approximately $907, & credit is $158 but only $450 was withheld.
Expected Balance: You will likely owe around $300 to California when you file your tax return.

The IRS and California Franchise Tax Board (FTB) treat withholding as being paid equally across all four quarters, even if the entire $4,950 was withheld today. This automatically protects you from underpayment penalties for earlier quarters.

You can completely avoid underpayment penalties if you meet the "Safe Harbor" guidelines. If you do not meet these rules and expect to owe $1,000 or more federally (or $500 or more to California), you must submit quarterly estimated tax payments.

@Felix Blanco Thanks for the question!

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer".