What Happens to a $900,000 401(k) When the Owner Turns 73 and the IRS Starts Setting the Withdrawal Amount

Picture a single retiree who turns 73 this year with $900,000 in a traditional 401(k), a Social Security check, and no urgent need to touch the account. Starting now, the IRS sets the minimum withdrawal every year. The account itself holds up reasonably well under that schedule. The tax return is where the surprise arrives.

How the IRS Picks Your First Number

The IRS takes your December 31 balance from the prior year and divides it by a life expectancy factor from the Uniform Lifetime Table. At 73, that factor is 26.5. On a $900,000 balance, the first required withdrawal comes to roughly $34,000, just under 4% of the account.

That percentage rises every year because the divisor shrinks, falling to 25.5 at age 74. In the early years, the withdrawals remain modest. With the 10-year Treasury yielding around 5.1%, even a conservative bond allocation can generate more than the IRS forces out. A growing balance may feel like a win, but it also means larger RMDs, and larger tax bills, deep into your 70s and 80s (we walked through how to avoid that first-year tax bomb, years before the withdrawals begin, in a free guide here).

A Year-One Deadline That Can Double Your Income

Your first RMD is due by April 1 of the year after you turn 73. Every subsequent RMD is due by December 31. Delaying the first one to April stacks two full withdrawals into the same tax year, which can push you into a higher bracket.

If you are still working and own less than 5% of the company, your current employer’s 401(k) can defer RMDs until you retire. Missing a withdrawal entirely triggers a 25% excise tax on the shortfall, reduced to 10% if you correct it within two years under SECURE 2.0.

Where the Withdrawal Lands on Your Return

For 2026, a single taxpayer gets a $16,100 standard deduction. The 12% bracket runs up to $50,400 of taxable income, and the 22% rate applies above that threshold ($100,800 for married couples filing jointly).

Social Security taxation is the hidden amplifier. The IRS adds your RMD, other income, and half your benefit to calculate “provisional income.” Once that total passes $34,000 for a single taxpayer, up to 85% of your benefit becomes taxable. In that zone, each extra RMD dollar can drag up to 85 cents in Social Security income onto the return with it. That is how a retiree nominally in the 22% bracket ends up with a marginal rate close to 40%.

Income also climbs without any decision on your part. The Social Security Administration officially set the 2027 cost-of-living adjustment at 3.6%, announced on October 14, 2026, the largest increase in four years. Interest on cash parked from RMD proceeds adds to the pile as well. A 12-month CD pays a national average of about 1.7%, while I Bonds carry a composite rate of 4.26% with federal tax deferred until redemption.

Medicare Reads Your Return Two Years Later

Medicare sets Part B and Part D premiums using income from two years prior. Your 2026 RMD directly shapes your 2028 premiums. Cross an IRMAA threshold and surcharges run from $70 to more than $400 per month per person. In a married couple, both spouses pay it independently.

The thresholds work like cliffs. One dollar over the line triggers the full surcharge for that tier, so a slightly larger withdrawal can cost far more in premiums than it adds in usable spending money.

Three Moves to Make Before December 31

1. Roll the 401(k) to an IRA if you give to charity. Qualified charitable distributions count toward your RMD and never hit your adjusted gross income, which keeps provisional income and IRMAA exposure lower. The limit is $111,000 per person in 2026, but QCDs are only available from IRAs. A 401(k) owner has to complete the rollover first.
2. Take your initial RMD in 2026 instead of waiting until April. Unless you qualify for the still-working exception, waiting stacks two withdrawals into 2027 and can push you across both a bracket line and an IRMAA tier, affecting 2029 premiums.
3. Run your provisional income before choosing withholding. Ask the plan to withhold federal tax directly from the RMD to avoid quarterly estimated payments. If your projected income lands within a few thousand dollars of an IRMAA threshold, a single session with a fee-only planner to fine-tune withdrawal timing can pay for itself in the first year of avoided surcharges alone.

With a $900,000 401(k) at 73, the real planning task is keeping each IRS-set withdrawal from inflating your benefit taxes and the Medicare costs that follow behind it.

Editor’s note: This update corrects the 2027 Social Security COLA figure from an earlier estimate of 3.3% to the official 3.6% announced by the Social Security Administration on October 14, 2026, and refreshes the 10-year Treasury yield to approximately 5.1% based on mid-October 2026 data. The I Bond composite rate and FDIC average CD rate have been confirmed against current figures.

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