What a Retiree’s Social Security Looks Like When a $900,000 401(k) Triggers a $36,600 Required Withdrawal

A $900,000 traditional 401(k) can seem like a windfall sitting untouched, but once the IRS requires withdrawals at age 75, the tax consequences can be far larger than the distribution itself.

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Consider a single retiree nearing 75. She has $900,000 in a traditional 401(k), receives $36,000 a year in Social Security and also gets a $20,000 pension. Those income sources are enough to cover her regular expenses, so she rarely taps the 401(k). Eventually, though, the IRS makes the decision for her, and the tax impact extends well beyond the withdrawal amount.

Why Age 75 Becomes the Key Year

Under SECURE 2.0, people who turn 74 after December 31, 2032 will have a required beginning age of 75. That applies to those born in 1960 or later. Her required minimum distribution, or RMD, is calculated by dividing the prior year-end balance by an IRS Uniform Lifetime Table factor.

At 75, the divisor is 24.6. On a $900,000 balance, that produces an initial RMD of $36,585. Because her RMD years begin in the 2030s, this example uses current tax rules and does not attempt to forecast future tax brackets.

How a $36,585 Withdrawal Can Lift Taxable Income by $59,285

Social Security taxation is based on “combined income,” which includes other income plus half of Social Security benefits. For single filers, the thresholds are $25,000 and $34,000. Congress established those figures in the law and they are not indexed for inflation. Once income passes the upper threshold, as much as 85% of benefits can become taxable.

Before any RMD, her pension plus half of her Social Security benefit adds up to combined income of $38,000. That means roughly $7,900 of her Social Security is taxable.

After the RMD is added, combined income rises to $74,585. Her taxable Social Security reaches the maximum: $30,600, equal to 85% of her benefit.

Along with the RMD itself, that creates an additional $22,700 of taxable Social Security on her return. In total, her taxable income increases by $59,285.

How the RMD Can Create Nearly Twice as Much Taxable Income

Because she is already above the upper threshold, each of the first roughly $26,700 she withdraws brings 85 cents of Social Security into taxable income as well. In effect, every $1 withdrawn creates $1.85 of taxable income.

For withdrawals that also increase taxable Social Security, her effective marginal tax rate reaches about 41% in the 22% bracket and 22% in the 12% bracket. Once 85% of her benefits are already taxable, that extra tax effect ends.

Her tax bracket also changes. Without the RMD, her adjusted gross income is $27,900. After the standard deduction of $18,150 for a single filer age 65 or older, about $9,750 remains taxable, all within the lowest bracket that tops out at $12,400.

With the RMD, her AGI rises to $87,185 and her taxable income to about $69,035. That places her well into the current 22% bracket, which runs from $50,401 to $105,700.

The issue worsens over time. Cost-of-living increases keep raising benefits, while the $25,000 and $34,000 Social Security thresholds do not move. Her RMD percentage also increases each year as the divisor declines.

How Close She Comes to a Medicare Surcharge

Under 2026 Medicare rules, her $87,185 AGI remains below the first single-filer income-related monthly adjustment amount, or IRMAA, threshold of $109,000, so she would still pay the standard $203 monthly Part B premium.

That leaves about $21,815 of room below the current threshold. If she crossed it, Part B would rise to about $284 a month under 2026 rates. Medicare generally bases that premium on her tax return from two years earlier.

Three Steps to Consider Before RMDs Begin

1. Use Roth conversions in the years before RMDs start. Moving money into a Roth IRA lowers the traditional 401(k) balance used to calculate future RMDs. Each year’s conversion should be sized with the relevant Medicare income threshold in mind, since conversions can affect premiums two years later.
2. Take the first RMD in the year she reaches 75. The law allows her to delay it until April 1 of the following year, but then two RMDs would appear on one tax return. That second withdrawal would arrive after Social Security has already been capped at 85% taxable and could push her beyond the IRMAA threshold.
3. Move part of the 401(k) into an IRA if she wants to use charitable giving. Qualified charitable distributions are available only from IRAs, begin at age 70½, and are limited to $111,000 per person in 2026. They count toward the RMD but are excluded from AGI, so they do not raise combined income.

The key lever is how much of her Social Security the required withdrawal pushes onto her tax return. Reducing the balance before age 75 is the best way to limit that effect, because once RMDs begin, the divisor determines how much must come out each year. A free guide to the RMD tax bomb explains how to reduce that first-year tax hit before it arrives.