Retirees may have income from Social Security, a pension, a retirement plan or other sources – and they typically must either have taxes withheld or make quarterly payments to avoid IRS penalties.

For 2024, the quarterly tax deadlines are April 15, June 17, September 16 and January 15, 2025. But a lesser-known year-end strategy can cover your taxes and still meet IRS rules, experts say.

Certain retirees can correct missed tax payments by taking withholdings from mandatory annual withdrawals, called required minimum distributions, or RMDs. These withdrawals are typically for tax-free retirement savings.

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“It’s very helpful,” especially when retirees sell investments or real estate that trigger taxable gains, says JoAnn May, a certified financial planner at Forest Asset Management in Riverside, Illinois.

While Social Security benefits are the most common form of retirement income, according to a recent report from the Federal Reserve Bank, 56% of retirees also had a pension by 2023.

At the same time, nearly half of retirees had income from interest, dividends or rents, and about a third had income from other employment, the Fed report shows.

As income increases, retirees usually have to withhold more taxes or increase their tax allowances, experts say.

Typically, taxes must be paid by quarterly deadlines, but some advisors cover a client’s taxes on all sources of income by withholding from annual RMDs, which typically occur near year-end.

The same strategy can be used for retirees who eventually realize that they did not withhold the correct amount of tax from other income or made too few advance payments.

“You get a credit for the tax payments you made throughout the year, even though you may not have made them until December,” said CFP Matthew Saneholtz, chief investment officer and senior wealth advisor at Tobias Financial Advisors in Plantation, Florida.

Generally, a tax forecast may be easier in the fourth quarter, but it’s important to keep an eye on income and tax liability throughout the year because it can affect other planning strategies, he said.

May of Forest Asset Management, who also recommends this strategy, typically conducts RMDs in November to allow time to resolve any problems.

Starting in 2023, due to changes introduced by Secure 2.0, most retirees will have to begin taking RMDs at age 73, and starting in 2033, that age will rise to 75.

The annual deadline for RMDs is December 31. If you miss the withdrawal or don’t take enough out in a given year, you’ll be charged a 25% penalty on the amount you should have withdrawn. (The deadline for your first RMD is extended to April 1 after the year you turn 73.)