Tax Bill

My financial experts did a good job.  Each month, when I review the composite accounts, the sum total increases.  My income is very predictable.  Wife has a pension, we both get social security, and I reached the age of IRA mandatory withdrawals.  More than we spend on ourselves.  Everything else stays in a few accounts, most distributed among a single manager.

As tax season arrives, we sent all the statements to our CPA, who compiled them.  What we owe created sticker shock.  While on paper my investments have made me quite prosperous, the IRS and State Treasury want their cuts in cash.  It seems my fund managers read the financial and political headwinds correctly.  They rode the markets upward and cashed out in favor of other investments.  That left my wife and me with capital gains that approached the total of our annual cash flow and exceeded our annual expenditures.  We pay estimated taxes on time each quarter.  It didn't come close to meeting our tax liability for the capital gains that we never considered spending on ourselves.  To make this even more of a jolt, our very high composite income for the 2024 year boosts our quarterly estimated obligations dramatically, even though the likelihood of duplication in a consecutive year is low.  

While my wealth is on paper, it is still accessible to me and to the tax collectors.  I had my advisor transfer enough money to our checking account to cover the immediate payment and the next quarterly ones.  Then our income will replenish that checking account gradually, though we may still have to transfer additional savings to that checking account.  I assume that we will drastically overpay what we owe next year so an impressive refund reconciliation is likely.  If our health and stamina hold up, we should allocate some of this, as immediate cash in our possession, to ourselves.

Undoubtedly, the fund managers served us well, as the intent was to create wealth from savings in the absence of ongoing earned income.  Volatility can be spooky, even when it falls in my favor.  But I asked my advisor if we might consider alternatives to incessant trading and profit taking which enhances my account balance but puts the onus of getting a lot of cash into my checking account on short notice to me.