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
Leaving $480,000 in two 401(k)s untouched while living on a military pension sounds like a solid plan until the IRS shows up at 73 and turns a decade of patience into a tax bill stacked on top of already-taxable income.
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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. The balance reaches about $781,900 by age 73.
The IRS Uniform Lifetime Table sets a divisor of 26.5 for a 73-year-old. The first RMD is the balance divided by that figure, which comes to about $29,500. Each spouse calculates the RMD on his or her own account, but the combined total is similar if they are close in age.
A 5% return is a reasonable middle-ground assumption. The 10-year Treasury yield was 5.24% on September 28, 2026, up from 3.97% in February. Higher returns over the decade mean a larger balance and larger RMD; lower returns mean smaller ones. This couple is ahead of the typical saver. Fidelity reported an average 401(k) balance of $146,400 at the end of 2025. Two average accounts total $292,800. The median participant holds less than the average.
Birth Year Can Move the Start Date
Under SECURE 2.0, RMDs start at 73 for people born between 1951 and 1959. For those born in 1960 or later, they start at 75. A couple turning 63 in 2026 falls in the later group, adding two more years of compounding before the first required withdrawal.
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. 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% rate applies up to $100,800 of taxable income, and the 22% rate applies above that. A couple can have about $133,000 in gross ordinary income before any dollar is taxed at 22%.
If the pension is below about $103,500, the whole RMD fits inside the 12% bracket, roughly $3,540 in federal tax. However, if the pension exceeds $133,000, the entire RMD is taxed at 22%, or about $6,490. Pensions in between split the RMD across both rates. Brackets rise with inflation each year.
Pension Raises Leave Less Room in the Lower Brackets
Military retired pay gets an annual cost-of-living adjustment linked to the Consumer Price Index for Urban Wage Earners and Clerical Workers. The 2027 Social Security COLA is on track for 3.3%. The broader CPI reached 334.131 in August 2026, up from 324.245 in September 2025.
Those raises protect purchasing power but add to taxable income every year. After a decade of adjustments, the pension will be larger at 73, leaving less room in the 12% bracket for the RMD. Average household spending was $78,535 in 2024, up from $72,973 in 2022.
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, often stopping at the top of the 12% bracket. Converted dollars no longer count toward future RMDs, and Roth IRAs have no RMDs for the original owner. Other households take small voluntary withdrawals to reduce the balance before RMDs start. 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.
Either way, you pay tax in earlier years at rates known today. Once you claim Social Security, its benefits add another layer of potentially taxable income.
What the $29,500 Estimate Depends On
The $29,500 estimate rests on three assumptions: a 5% annual return, a start at age 73, and no withdrawals for ten years. If any of those change, the number changes too. The tax treatment stays the same. The pension and the RMD are both ordinary income, and the pension amount largely determines whether the first RMD is taxed at 12%, 22%, or a mix of the two.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
