A 65-year-old single woman walks into retirement with $1.8 million in a traditional 401(k), $250,000 in a taxable brokerage, and $100,000 in cash. She wants to spend $80,000 a year. The forum default is to file at full retirement age 67 and let the 401(k) keep compounding. A better sequence flips that logic: she draws down the 401(k) and brokerage from ages 65 to 70 and lets the Social Security check grow to its maximum before she touches it.
Why the bridge years are worth more than the deferral
Her benefit at full retirement age would be $36,000 a year. Waiting until 70 turns that into $44,640 a year, courtesy of the 8% delayed retirement credit per year past FRA. Those credits accumulate at two-thirds of 1% per month and stop accruing entirely at age 70, so filing even one month late past that birthday means forfeited income with no recovery. Run the higher check to age 90 and the extra income totals $172,800 in nominal dollars before any cost-of-living adjustment compounds on the larger base. Given that the consumer price index posted a 4.2% annual rate in May 2026 as measured by the CPI, locking in a bigger inflation-adjusted base matters more than it did just a few years ago.
The five-year drawdown math
Five years of $80,000 spending equals $400,000. Pulling roughly half from the 401(k) and half from the brokerage keeps her in the lowest two federal brackets throughout the bridge period. In 2026, a single filer aged 65 or older can claim a base standard deduction of $16,100 plus an additional $2,050 age deduction, for a combined $18,150 shielded from tax before a dollar of 401(k) income is counted. On top of that, the One Big Beautiful Bill Act created a new temporary $6,000 senior bonus deduction available to single filers aged 65 and older with modified adjusted gross income below $75,000, valid for tax years 2025 through 2028. That additional layer can push effective taxable income well below the 12% bracket ceiling.
Taking $40,000 from the 401(k) and subtracting the $18,150 combined deduction leaves roughly $21,850 of taxable income. That sits comfortably inside the 12% bracket, which runs to $50,400 for single filers in 2026, and produces roughly $2,600 in federal tax per year, or about $13,000 across the five-year bridge.
The brokerage half is even cheaper to spend. Long-term capital gains stacked on top of that low ordinary income largely fall inside the 0% capital gains rate, which applies to taxable income up to $49,450 for single filers in 2026. Any unrealized losses in the portfolio can be harvested to offset future gains, compressing the tax bill further.
The RMD and Social Security tax cascade she avoids
Draining roughly $200,000 from the 401(k) during the gap reduces her year-one required minimum distribution at age 73 by about $7,800. That alone is meaningful, but the real prize is the provisional-income math. Once Social Security starts, single filers see up to 50% of benefits become taxable above $25,000 of provisional income, and up to 85% above $34,000. Those thresholds have not been indexed for inflation since 1984, which means more retirees collide with them every year.
A bigger Social Security check at 70 displaces the 401(k) withdrawals that would otherwise push her over those cliffs. A retiree in the 22% bracket who simultaneously triggers 85% Social Security taxation and an IRMAA Medicare surcharge can face an effective marginal rate near 40% on the next dollar pulled from the 401(k). The bridge strategy is designed to keep her well below that trap.
The rate environment adds another tailwind. The Federal Reserve held its benchmark federal funds rate at 3.5%-3.75% through June 2026 while signaling that further movement could go either direction. Cash and short-duration bonds inside the 401(k) still generate a real return at these levels, so the bridge does not erode purchasing power while it works.
What to do in the next 30 days
- Map the bracket fill. Pull only enough from the 401(k) each year to bring taxable income to the top of the 12% bracket. With the 2026 single 12% bracket ending at $50,400, that leaves room for small bracket-filling Roth conversions inside the same window, shrinking future RMDs further.
- Run the brokerage first on appreciated lots with offsetting losers. Harvest losses while drawing it down so that capital gains stay inside the 0% rate and never collide with the eventual Social Security check.
- File for Social Security the month you turn 70. Delayed retirement credits stop accruing at 70. Waiting a single extra month past that birthday is pure forfeited income.
The arithmetic favors the reverse sequence. Spend the tax-deferred dollars while the standard deduction and age-related deductions are shielding them, and let the inflation-protected government annuity grow to its largest possible base before the first check ever arrives.
Editor’s note: This article has been updated to reflect 2026 tax figures. The standard deduction available to a single filer aged 65 or older is $18,150 (the $16,100 base plus $2,050 age deduction), not the $16,550 figure previously cited. The article also notes the new $6,000 OBBBA senior bonus deduction available for tax years 2025 through 2028, the 0% long-term capital gains threshold of $49,450 for single filers in 2026, and the current federal funds rate of 3.5%-3.75% as set by the Fed at its June 2026 meeting.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks