Retired Ironworker With a $5,400-a-Month Union Pension and $800,000 in a 401(k) Will Be Slammed by Three Layers of Tax He Never Saw on a Paycheck

A single 65-year-old retired ironworker with a $5,400-a-month union pension and $800,000 in a 401(k) is in a position many building-trades retirees reach after a full career in the local. For decades, taxes came out of each paycheck automatically, but in retirement, three tax mechanisms stack: ordinary income tax on the pension and 401(k) withdrawals, federal tax on Social Security payments, and Medicare premium surcharges tied to income.

The setup is common, and one retirement planning podcast recently described the same three traps: RMDs at 73, Social Security taxes, and Medicare’s income surcharges. Households headed by people ages 55 to 69 hold 48% of all U.S. defined benefit pension entitlements and 50% of defined contribution balances, so millions of people carry both kinds of plan into retirement.

His Pension Already Uses Up the Cheap Brackets

For this individual, the pension pays $64,800 a year, and pensions count as gross income under 26 U.S.C. § 61(a)(10). Subtract the 2026 single standard deduction of $16,100 and the temporary senior deduction of $2,000, and taxable income comes to about $46,700 before he touches the 401(k). The 22% bracket begins at $50,400 and the 24% bracket at $105,700.

The pension fills the low brackets for life, so nearly every dollar in a 401(k) lands on top of it at 22% or higher.

Three Layers Arrive Together at Age 73

Another big thing to know is that required minimum distributions start at age 73 under 26 U.S.C. § 401(a)(9)(C)(v). The 401(k) grows 6% a year if left alone. It reaches roughly $1.28 million by then, and the first RMD comes to around $48,000 under the IRS Uniform Lifetime Table (a divisor of 26.5). Add a Social Security check near the average retired-worker benefit of $2,095 a month.

1. Income tax: Adjusted gross income rises to about $134,000. The senior deduction applies only to tax years beginning before January 1, 2029, so taxable income lands near $118,000. That puts the top portion in the 24% bracket.
2. Social Security tax: Benefits start becoming taxable once income passes a single filer’s base amount of $25,000 and adjusted base amount of $34,000. These figures are written into the statute and have never been indexed for inflation. At this income, up to 85% of benefits are taxable, which is about $21,000 a year.
3. Medicare surcharges: Anyone filing as single with an income over $109,000 pays an income-related surcharge known as IRMAA. At today’s thresholds, Part B rises from $202.90 to $284.10 a month, plus $14.50 for Part D. Because the surcharge looks back at past tax returns, a high-income year shows up in premiums two years later.

Roth Conversions Before RMDs Can Shrink All Three Tax Layers

One common approach for single retirees in this spot is to move 401(k) money into a Roth IRA each year between retirement and 73. The IRMAA line of $109,000 minus the pension leaves about $44,200 of conversion room a year, taxed mostly at 22%. Delaying Social Security until closer to 70 keeps that room open and raises the eventual check. Qualified Roth withdrawals aren’t includible in gross income, and each dollar converted reduces future RMDs that offset all three layers.

Converting has costs, and paying the tax bill from cash outside the 401(k) keeps more money in the Roth. Income above $75,000 also cuts the senior deduction by 6% of the excess, a small but real drag through 2028.

The other path is to take only the RMDs. That pushes tax into the future, but the balance keeps compounding into larger forced withdrawals stacked on a fixed pension, and for a single retiree with a pension this size, that path tends to produce higher taxable income later. Married couples have more room: a joint Social Security base of $32,000, an IRMAA threshold of $218,000, and a 12% bracket that runs to $100,800. A surviving spouse, though, eventually files as single while keeping much of that income.

Two Numbers to Check Before Taking Any Withdrawal

Each year, the first thing to do is check where projected income sits against two lines: the 24% bracket at $105,700 and the IRMAA threshold at $109,000. A pension makes the starting point predictable, making conversion planning far easier than for retirees whose income fluctuates.

Many retirees leave the 401(k) untouched until 73 because the pension already covers the bills. Those years before RMDs are often the lowest-tax window for paying tax on that money (we counted nine IRS rules like these three and detailed them all in a free report). A survivor pension election or a spouse may be involved. A CPA can model the widowhood years, since the survivor’s tax brackets drop to roughly half the joint levels, which can change how much to convert.

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