Retired Couples With $700,000 in a 401(k) Can See Social Security Taxes Jump by About $3,100 a Year

A standard 401(k) withdrawal can set off taxes on income a retired couple never directly spent, and many people do not realize it until the bill has already grown.

A $28,455 distribution from a traditional 401(k) may look like ordinary taxable income. For one retired couple, though, it triggers a tax cascade that makes another $24,187 of their Social Security benefits taxable and raises their federal tax bill by about $3,100.

Picture a hypothetical married couple, both age 75, with $700,000 saved in a traditional 401(k). Each receives $3,750 a month in Social Security, and a pension plus bank interest add another $48,900 a year. They already pay tax on part of their benefits, but the required withdrawal pushes their tax bill much higher.

Why the $28,455 RMD Changes Everything

Taxes are triggered when money leaves the account, and this couple has already reached the required withdrawal stage. At age 75, the IRS Uniform Lifetime Table divisor is 24.6, which means a $700,000 balance at the end of the prior year creates a required minimum distribution, or RMD, of $28,455.

If they fail to take it, they could face a 25% penalty on the amount missed, although that drops to 10% if the mistake is corrected in time.

How the Withdrawal Pulls More Social Security Into Taxation

Combined income is calculated by adding other income to half of Social Security benefits. For married couples filing jointly, taxation begins above $32,000. Once combined income passes $44,000, as much as 85% of benefits can be taxed. Here is how the couple’s numbers change with and without the $28,455 RMD:

Because the couple was already in the 85% range, each additional RMD dollar drags 85 cents of benefits onto the tax return. That produces $24,187 of added taxable Social Security, even though those benefits were already being received.

How the Extra $3,100 Is Added to the Bill

Under 2026 rules, the couple subtracts $32,200, plus $1,650 each for being 65 or older. Adding the new $6,000 senior deduction for each spouse brings the total deduction to $47,500.

The 12% bracket ends at $100,800 of taxable income, and the 22% bracket begins there.

1. Without the RMD: taxable income of $49,815 produces federal tax of $5,482.
2. With the RMD added but taxable Social Security left unchanged: taxable income rises to $78,270 and tax increases to $8,896. The $3,415 difference is the tax on the RMD itself.
3. When the newly taxable benefits are included: taxable income climbs to $102,457, moving into the 22% bracket, and tax reaches $11,964. The $3,068 difference, or roughly $3,100, is the tax on Social Security they did not expect to owe.

All told, the $28,455 withdrawal creates $6,483 in federal tax, or about 23% of the RMD.

The final dollars of the RMD are taxed even more heavily. Each dollar that falls in the 22% bracket carries $1.85 of taxable income, which equals an effective rate of 41%. The same calculation in the 12% bracket results in a 22% rate.

Their adjusted gross income comes to $149,957, just under the $150,000 point where the senior deduction begins phasing out. A slightly larger RMD could reduce that deduction as well. Medicare surcharges are not an issue at this income level. Under 2026 rules, the first surcharge starts above $218,000 for joint filers, while the standard Part B premium is about $203 a month each.

That is the catch: a mandatory 401(k) withdrawal does more than create its own tax bill. It can also make more of Social Security taxable. A free guide explains how to get ready for that first withdrawal years in advance: The First-Year Tax Bomb.

Three Ways to Reduce the Shock

1. Take withdrawals before Social Security starts. In the gap between retirement and claiming benefits, 401(k) withdrawals are taxed on their own and do not have Social Security in the formula working against them. Every dollar withdrawn in your 60s is a dollar that cannot later pull 85 cents of benefits into taxable income. Using up the 12% bracket in those years can help soften future RMD pressure.

2. Convert to Roth during that same window, while watching Medicare. Roth conversions shrink the pretax balance that future RMDs are based on. Because Medicare usually looks at income from two years earlier, conversions beginning at age 63 can affect premiums later. Under 2026 rules, joint income above $218,000 raises Part B to about $284 a month per person. Keep the applicable Medicare threshold in mind when deciding how much to convert.

3. If RMDs have already started, use qualified charitable distributions, or QCDs. For those who give to charity, moving eligible 401(k) money into an IRA can help limit future RMDs. This year’s 401(k) RMD must still be taken first, since it cannot be rolled over. A QCD sent directly from an IRA to charity can count toward future IRA RMDs without being included in taxable income, up to $111,000 per person in 2026. That can also reduce the tax on Social Security benefits.