How an Untouched $900,000 401(k) Can Turn Into a $69,000 Required Withdrawal Later

Letting a sizable 401(k) sit untouched for many years can seem like a wise choice, but once required withdrawals begin, the IRS can force a distribution that brings tax consequences well beyond the account itself.

A 62-year-old with $900,000 in a traditional 401(k) may already have enough outside income to pay the bills. Leaving the money alone might appear sensible, yet by age 75 the balance could almost double, and the IRS could then require a withdrawal of nearly $69,000.

Kiplinger recently highlighted a 75-year-old reader asking whether it was too late to pursue Roth conversions. That question is best considered years earlier, before mandatory withdrawals start.

What 13 Years of Growth Can Produce

The SECURE 2.0 retirement law, enacted in 2022, raised the required minimum distribution age to 75 for people born in 1960 or later.

In this example, the saver turns 74 in 2038, which means the first required withdrawal arrives in 2039.

If the account earns 5% annually from the end of 2025 through the end of 2038, the $900,000 balance grows to roughly $1.7 million over 13 years without any additional contributions.

Use your own balance and timeline to run the numbers.

How $1.7 Million Leads to a Nearly $69,000 RMD

Each required minimum distribution is calculated from the account balance on December 31 of the prior year, according to IRS Publication 590-B. For a 2039 withdrawal, that means the balance at the end of 2038.

That amount is divided by the Uniform Lifetime Table factor for age 75, which is 24.6, producing a required withdrawal of about $69,000.

The first RMD can be delayed until April 1 of the following year. However, that delay means two required withdrawals land in the same tax year. Failing to take an RMD can trigger a 25% penalty on the amount not withdrawn, though it drops to 10% if corrected promptly.

Why the Tax Cost Can Rise Faster Than the Withdrawal

Consider a married couple filing jointly under 2026 tax brackets, with $60,000 from Social Security and another $40,000 from pension and interest income. Before the RMD, $28,100 of their Social Security benefits is taxable.

After the standard deduction and the age-65 add-ons, about $32,600 is taxable, placing them in the 12% bracket.

If a $69,000 RMD is added, the taxable share of Social Security climbs to the 85% cap of $51,000. Taxable income then rises by about $91,900, which is more than the withdrawal itself.

Federal tax increases by roughly $13,400, or nearly 19% of the RMD. Their income also moves into the 22% bracket, which begins above $100,800.

While Social Security is still being phased into taxable income, every added 401(k) dollar can make another 85 cents of benefits taxable. In the 12% bracket, that works out to an effective marginal rate of 22.2%. Once 85% of benefits are taxable, that added tax effect stops.

The joint-filer thresholds that create this effect, $32,000 and $44,000, are written into law without inflation adjustments. Tax brackets, by contrast, move higher with inflation each year. Those fixed lines leave more room for tax pressure over time.

Medicare Premiums Are Tied to the Same Income

The couple’s modified adjusted gross income, the figure Medicare uses, would be about $160,000, which remains below the joint IRMAA threshold of $218,000. For single filers, the line is $109,000. That makes a surviving spouse more exposed to the surcharge. Crossing the first tier adds roughly $2,300 a year in Part B and Part D premiums for a couple.

Medicare sets premiums using a tax return from two years earlier. That means an RMD taken at 75 can affect premiums at 77.

Three Ways to Alter the $69,000 Outcome

1. Leave the account alone. This produces the full first withdrawal of about $69,000. At age 75, the RMD is roughly 4% of the balance, so a 5% return could still allow the account to keep growing. Later withdrawals will depend on performance and the IRS divisor.
2. Take pretax withdrawals gradually. Starting distributions at 62 reduces the balance by 2038 and lowers the eventual RMD. Each withdrawal is taxed as ordinary income in the year it is taken, and that money no longer grows tax-deferred inside the 401(k).
3. Convert money to a Roth each year. Shifting funds into a Roth before RMDs begin can reduce later taxable withdrawals. Filling the 12% bracket may make sense if future tax rates are expected to be higher. Converting at 62 also avoids affecting Medicare premiums at 65, which are generally based on income from age 63.

Those lower-tax years between 62 and the first required withdrawal are the focus of a free guide we created on the Roth conversion window.

Steps to Take Before the Window Closes

• Estimate the account balance for the year you turn 74, then divide it by 24.6 to find the first RMD.
• From age 62 onward, look at available room in your tax bracket before deciding how much to convert. Starting at 63, also consider the Medicare surcharge threshold.
• If your expected RMD and Social Security could push joint income above $218,000, it may be worth hiring a fee-only advisor to model a multi-year conversion strategy.

After the first withdrawal of about $69,000, the amount will change each year based on the balance and age, so the calculation should be repeated annually.