A Couple Who Retires at 63 With $480,000 Between Two 401(k)s and Lives on His Military Pension for Ten Years Can Expect First RMDs of $29,500 at 73, Every Dollar Taxable on Top of the Pension

A couple retires at 63 with $480,000 in two 401(k)s, starts living on his military pension, and leaves the 401(k) money untouched for ten years. What happens when required minimum distributions (RMDs) begin, and how do those withdrawals stack on top of already-taxable pension income?

How $480,000 Turns Into a $29,500 First Withdrawal

The combined $480,000 earns 5% a year for ten years with no withdrawals. By age 73, the balance reaches roughly $781,900.

The IRS Uniform Lifetime Table sets a divisor of 26.5 for a 73-year-old. Divide the balance by that figure and the first RMD lands at about $29,500. Each spouse calculates the RMD on his or her own account, but the combined total is similar when the two are close in age.

A 5% return is a reasonable middle-ground assumption, anchored by recent Treasury yields. The 10-year Treasury yield peaked at 5.36% on October 7, 2026, before easing back toward 5% by late October. The 52-week range has run from 3.97% in February 2026 to that October high. Higher returns over the decade produce a larger balance and a larger RMD; lower returns shrink both. Either way, this couple is ahead of the typical saver. Fidelity reported an average 401(k) balance of $146,400 at the end of 2025, so two average accounts total just $292,800. The median participant holds less than the average, making $480,000 across two accounts a genuinely strong starting position.

Birth Year Can Move the Start Date

Under SECURE 2.0, RMDs begin at 73 for people born between 1951 and 1959. For those born in 1960 or later, the starting age moves to 75. A couple turning 63 in 2026 falls in the later group, which means two additional years of compounding before the first required withdrawal arrives.

Every RMD Dollar Stacks on Top of the Pension

Military retired pay is taxed as ordinary income, and so are 401(k) RMDs. The pension fills the lower tax brackets first, so each RMD dollar is taxed at whatever marginal rate the pension has already reached.

For 2026, the standard deduction for married couples filing jointly is $32,200. The 12% bracket applies to taxable income up to $100,800, and the 22% bracket begins above that. Add the standard deduction back and a couple can carry roughly $133,000 in gross ordinary income before a single dollar gets taxed at 22%. There is one additional detail worth noting: by the time RMDs arrive at age 73, both spouses qualify for the over-65 additional standard deduction of $1,650 each, pushing the effective gross threshold modestly higher.

With those thresholds in mind, the pension’s size largely determines where the $29,500 RMD lands. If the pension keeps gross income well below $103,500, the entire RMD fits inside the 12% bracket, producing roughly $3,540 in federal tax on the distribution. If the pension has already pushed gross income past $133,000, the whole RMD falls into the 22% bracket, a bill of about $6,490. Pensions that fall between those two numbers will split the RMD across both rates. Brackets adjust for inflation each year.

Pension Raises Leave Less Room in the Lower Brackets

Military retired pay receives an annual cost-of-living adjustment tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. The Social Security Administration officially announced a 3.6% COLA for 2027 on October 14, 2026, the largest increase since 2023, based on third-quarter CPI-W data. Military pay COLAs follow the same CPI-W measure, so a similar adjustment typically flows through to retired service members.

Those raises protect purchasing power, but they also add to taxable income every year. After a decade of annual adjustments, the pension will be meaningfully larger at 73, leaving less room in the 12% bracket to absorb the RMD without touching the 22% rate. For context, the average U.S. household spent $78,535 in 2024, up from $72,967 in 2022, according to the Bureau of Labor Statistics Consumer Expenditure Survey. A military pension that keeps pace with that spending level is also marching steadily toward the bracket boundary.

Using the Ten Years Before RMDs Begin

From 63 to 73, taxable income is at its lowest because only the pension is coming in. Some households use these years for partial Roth conversions, moving 401(k) money into a Roth account and paying tax on the converted amount, typically stopping at the top of the 12% bracket each year. Converted dollars no longer count toward future RMDs, and Roth IRAs carry no RMDs for the original owner. Other households take small voluntary withdrawals each year to chip away at the pre-tax balance before the required clock starts. Both strategies mean paying tax at rates that are known today rather than unknown rates in the future. Reducing the pre-tax balance before required withdrawals begin is exactly the fix we walked through in a free guide on the first-year RMD tax bomb.

Once Social Security is claimed, its benefits add another layer of potentially taxable income on top of the pension and the RMD, compounding the bracket pressure further.

What the $29,500 Estimate Depends On

The $29,500 figure rests on three assumptions: a 5% annual return, a first RMD at 73, and no withdrawals for ten years. Change any one of those and the number shifts. What does not change is the tax treatment. Both the pension and the RMD are ordinary income, and the pension amount largely determines whether that first distribution is taxed at 12%, 22%, or a blend of the two.

Editor’s note: This article was updated to reflect the Social Security Administration’s official 2027 COLA announcement of 3.6% (issued October 14, 2026), the October 2026 10-year Treasury yield range (which peaked at 5.36% on October 7 before easing toward 5%), and the additional standard deduction of $1,650 per qualifying spouse available to couples age 65 and older under 2026 tax rules.

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