A 73-year-old single retiree sitting on $2.5 million in a traditional 401(k) is about to learn that the IRS does not care whether the income is needed. The first required minimum distribution lands at roughly $94,340, or about $7,862 a month, whether the retiree spends a dime of it or not.
The real damage shows up on every other line of the tax return.
Where the $94,340 Comes From
The IRS Uniform Lifetime Table divides the prior year-end balance by 26.5 at age 73. On $2.5 million, that produces the $94,340 figure. Each subsequent year the divisor shrinks while a healthy portfolio keeps growing, which is why the cumulative RMD-driven tax bill over 20 years can clear $400,000 for a balance of this size.
Stack the first-year RMD on a modest $30,000 Social Security benefit. At this income level, 85% of the benefit, or $25,500, becomes taxable. Ordinary income now totals $119,840 before any deduction.
The 2026 standard deduction for a single filer aged 65 combines the $16,100 base with a $2,050 age add-on, for a confirmed total of $18,150. Subtracting that from $119,840 leaves taxable income near $101,690. Federal income tax comes to roughly $17,100, placing the top dollars in the 22% bracket. One additional note: the One Big Beautiful Bill Act, signed into law in July 2025, created a temporary $6,000 senior bonus deduction available through 2028 for filers aged 65 and older. Because it phases out starting at $75,000 in MAGI at a rate of 6 cents per dollar of income above the threshold, our hypothetical retiree at roughly $120,000 MAGI retains only a partial benefit, worth approximately $3,310 after phaseout. That additional relief narrows the tax bill somewhat but does not eliminate the bracket problem.
The IRMAA Trap Hiding in the MAGI Line
Medicare Part B and Part D premiums step up at fixed MAGI thresholds using a two-year lookback. The first single-filer tier in 2026 begins at $109,000. The RMD plus taxable Social Security clears it, triggering a combined Tier 1 surcharge of $81.20 per month for Part B and $14.50 per month for Part D. That totals $1,148 per year in additional Medicare costs at the first tier alone. Higher tiers push the annual penalty to $2,000, $4,600, or beyond, depending on income.
Layer the 22% federal bracket, taxable Social Security, and IRMAA together, and the effective marginal rate on the last slice of the RMD pushes toward 40%. That is the cascade most retirees do not model when they are 60 and admiring the 401(k) balance. The IRMAA letter also arrives based on income from two years prior, meaning by the time it lands, the income that triggered it is already locked in.
Inflation Makes the Forced Withdrawal Worse
The 10-year Treasury yield sits near 4.38% as of late June 2026, and core PCE inflation remains well above the Fed’s 2% target. A fixed $94,340 distribution buys less each year, while the dollar amount of the RMD itself ratchets higher as the divisor falls. The retiree ends up paying more tax on a check whose purchasing power keeps shrinking.
Three Moves That Actually Change the Math
- Bracket-fill Roth conversions between 60 and 72. Every dollar converted in the 12% or 22% bracket before RMDs begin is a dollar that never shows up in the divisor at 73. Converting $50,000 a year for a decade can knock roughly 20% off the eventual RMD and help keep MAGI under the first IRMAA tier in retirement.
- Use QCDs once RMDs begin. A qualified charitable distribution sends up to $108,000 in 2026 directly from a traditional IRA to charity, satisfying the RMD obligation with zero taxable income recognized. The 401(k) itself does not qualify, so rolling part of the balance to an IRA at retirement is the prerequisite. For charitably inclined retirees, this is the single highest-leverage tax move available after 73.
- Park up to $210,000 in a QLAC. A qualifying longevity annuity contract lets a retiree shift up to $210,000 of balance out of the RMD calculation and defer payments to age 85. Those carved-out dollars do not appear in the divisor math, lowering every RMD between 73 and 85 and reducing IRMAA exposure during the highest-cost Medicare years.
The action item before any of this: pull the December 31 balance, run the divisor, and check whether the resulting MAGI clears $109,000. If it does, the IRMAA surcharge is already in the pipeline two years from now, and the planning window for conversions is the time between today and the first RMD year. Waiting until 73 to model this is waiting too long.
Editor’s note: This article has been updated to reflect confirmed 2026 tax figures, including the corrected single-filer standard deduction of $18,150 (base $16,100 plus the $2,050 age-65 add-on) and the new temporary OBBBA senior bonus deduction that partially phases out at the income level in this scenario. The IRMAA Tier 1 annual surcharge was corrected to $1,148 per year, and the 10-year Treasury yield was refreshed to approximately 4.38% as of late June 2026.
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