Fidelity’s latest analysis of 24.8 million participants shows that the average American age 70 and older with a workplace retirement account has about $250,000 in a 401(k). That may sound like a sizable nest egg, but it is really the starting point for a long withdrawal schedule, not the finish line. Under current law, the IRS no longer forces retirees to begin taking money out at 70. Instead, the required minimum distribution begins at age 73 and continues every year for the rest of the account holder’s life. With a $250,000 balance, the first RMD is about $9,434, resulting in an estimated federal tax bill of roughly $1,132 for a typical retiree.
What the Balance Actually Generates
The RMD formula is mechanical. The IRS divides the December 31 account balance by a life-expectancy factor from the Uniform Lifetime Table. At age 73, that factor is 26.5. A $250,000 balance produces a first-year RMD of $9,434. The Baby Boomer cohort in Fidelity’s data holds slightly more: an average 401(k) balance of $267,900 and an average IRA balance of $257,002. Someone with both accounts would face a combined first RMD closer to $19,800. The withdrawal is required whether or not the retiree needs the cash.
That $9,434 covers roughly six weeks of typical spending. The Bureau of Labor Statistics puts average household expenditures at $78,535 per year across all age groups. The forced withdrawal functions as a small monthly income supplement that the government has decided the retiree must accept.
How the Tax Bill Gets Built
RMDs are taxed as ordinary income. For a married couple filing jointly in 2026, the standard deduction is $32,200, with additional amounts for filers 65 and older. The 12% federal bracket applies to taxable income up to $100,800, and the 22% bracket kicks in above that threshold. Most 73-year-olds drawing an average Social Security check of $2,071 per month, or about $24,852 annually, land squarely in the 12% tax bracket once RMDs are added. That produces the ~$1,132 federal tax figure.
The picture changes for households with pensions, part-time wages, or a working spouse. Adding the $9,434 RMD to income already in the 22% bracket results in federal tax of about $2,075 on the same withdrawal. State income tax, where applicable, sits on top. And because up to 85% of Social Security becomes taxable once combined income crosses modest thresholds, the RMD can pull additional benefit dollars into taxable territory. That is the mechanism behind the “tax torpedo” retirees hear about. The RMD itself is small. Its secondary effects on Social Security taxation and Medicare IRMAA surcharges are what surprise people.
The Inflation Layer
The 2026 Social Security COLA came in at 2.8%. Headline inflation is running at 1.6% year over year. Benefits are outpacing CPI at the moment, but the retiree’s larger problem is that RMD percentages rise every year as the life-expectancy divisor shrinks. At 75, the divisor drops to 24.6. At 80, it falls to 20.2. The same $250,000 balance forces a larger percentage out each year, whether markets cooperate or not.
What This Means for Someone Approaching 73
Several planning levers exist beyond the tax bill itself. First, Roth conversions in the window between retirement and age 73 shift dollars out of the RMD base. Every $10,000 converted at a 12% marginal rate costs $1,200 today but eliminates future RMDs on that amount. Second, qualified charitable distributions (QCDs) allow up to $108,000 in 2026 to move directly from an IRA to a charity, satisfying the RMD without adding to taxable income. Third, the timing of the first RMD is flexible. It can be deferred until April 1 of the year after turning 73, but doing so stacks two RMDs into a single tax year, often pushing income into the 22% bracket unnecessarily.
The average 70-year-old’s $250,000 balance produces a modest first RMD and a modest first tax bill. The larger reality is that the withdrawal schedule is now set, the calculation is not optional, and the retiree’s job for the next two decades is managing the tax character of money accumulated tax-deferred over the previous four.
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