Every financial goal you’ve shared—whether it’s building more flexibility today, preparing for retirement, or protecting the lifestyle you’ve worked hard to create—benefits from one key ingredient: fewer surprises.
As we head toward year-end, here’s a simple, high-impact checkup we recommend: take a fresh look at your tax withholding.
In plain terms, this is the amount being taken out of each paycheck (or withheld from certain types of income) to help cover your federal tax bill.
Why withholding is worth revisiting
Withholding isn’t a “set it and forget it” item—because your life rarely stays the same all year.
Even if nothing dramatic happened, small shifts can add up. And if you experienced a bigger change, it’s even more important to confirm you’re still on track.
Here are a few common reasons withholding can drift off course:
- Income changes, new job, promotion, or reduced hours
- Bonuses or commissions (often withheld differently than regular wages)
- A spouse’s income changes that alters the household picture
- Retirement plan contribution changes (which can affect taxable income)
- Family changes, such as a dependent status change
- Investment income that’s higher than expected
- Starting or stopping side income (consulting, rentals, etc.)
- Moving toward retirement, where income may come from multiple sources instead of one paycheck
When withholding is off, the result is usually one of two outcomes:
- Underwithholding: You may owe more than expected at tax time (and potentially penalties).
- Overwithholding: You may receive a large refund—nice emotionally, but it can also mean you sent the IRS more than you needed to throughout the year.
Our goal is not to chase perfection—it’s to keep your plan aligned so taxes don’t interrupt your momentum.
Two quick questions to ask yourself
Pull up your most recent pay stub and ask:
- How much is being withheld for federal taxes per paycheck?
- Does that still match what this year has actually looked like for our household?
If you’ve had steady income and no major changes, you may be just fine. But if you’ve had any shifts—income, benefits, family, or filing situation—it’s worth a closer look.
A helpful resource: the IRS Tax Withholding Estimator
The IRS offers a free online tool called the IRS Tax Withholding Estimator. (Search online for “IRS tax withholding estimator” and it should come right up.)
This tool can be especially helpful if your tax picture is more layered than a single W-2 paycheck—such as when you have:
- Multiple jobs in the household
- Bonus/variable compensation
- Side income or self-employment income
- Pension income
- Social Security benefits (for those already taking them)
- Multiple income sources, which is common as people approach or enter retirement
What you’ll want in front of you
To make the estimator as accurate as possible, it helps to have:
- Your most recent pay stub (and your spouse’s, if applicable)
- A general idea of other income sources (interest/dividends, side income, etc.)
- An estimate of deductions/credits you expect to claim
The estimator typically provides a snapshot of whether you’re trending toward owing taxes or receiving a refund—and may point you toward potential adjustments.
Why checking now can make a real difference
Year-end timing matters because you may still have options before the calendar closes.
Depending on your situation, potential next steps (often in coordination with your tax professional) might include:
- Updating your W-4 with your employer (for W-2 earners)
- Adjusting withholding on pension income (for retirees)
- Reviewing your approach to estimated tax payments (often relevant for self-employed income)
Even small adjustments made sooner rather than later can help reduce the chances of an unwelcome surprise.
What a surprising result might mean (and why that can be okay)
If the estimator suggests you’re overwithheld or underwithheld, it doesn’t automatically mean anything is “wrong.” Often, it’s simply a reflection of progress or transition—higher earnings, changing priorities, new income streams, or a shift toward retirement.
What matters is that your strategy stays coordinated:
- Your cash flow supports your day-to-day life.
- Your savings and investment plan stays consistent.
- Your tax decisions fit into your bigger picture.
That’s the kind of alignment we’re aiming for.
How we can support you
If you run the estimator and it raises questions, we’re happy to help you think through the planning side—how it may affect your budget, savings goals, retirement timeline, or distribution strategy.
Because tax rules are complex and highly personal, we also encourage you to connect with your CPA or licensed tax professional for advice specific to your situation.
A simple next step
Before the year ends, take a few minutes to review your withholding and ask:
- Am I likely to be underwithheld?
- Am I likely to be overwithheld?
- Did anything change this year that might affect our taxes?
A quick check now can help you enter the new year with more clarity, confidence, and control.
Important disclosure: This material is provided for general informational purposes only and is not intended as tax or legal advice. Please consult a qualified tax or legal professional regarding your individual circumstances. Information is not intended for the purpose of avoiding any federal tax penalties.