She Turns 65 With $900,000 in a Traditional 401(k). Her First $24,150 Withdrawal in 2026 Will Produce $0 in Federal Income Tax

A newly retired 65-year-old has $900,000 in a traditional 401(k) and needs $24,150 to cover her first year without a paycheck. She has no other income. She isn’t taking Social Security yet and has no pension. Even so, every dollar of that withdrawal comes out with $0 in federal income tax for 2026.

Decades of warnings about the “tax bomb” in pretax accounts make that hard to believe. Three deductions make it work, and the window to use them is short.

How Three Deductions Shelter the Entire Withdrawal

In 2026, a single filer’s standard deduction is $16,100. If you’re unmarried and 65 or older, you get an extra $2,050 on top of it.

The third piece is new. The One, Big, Beautiful Bill added a $6,000 deduction for each taxpayer who turns 65 by year-end. It covers tax years beginning before January 1, 2029.

Add the three together and you get $24,150. That’s the exact size of her withdrawal. It’s also about 3% of her balance, a withdrawal rate that leaves plenty of room for the portfolio to keep growing.

Why Pretax Savings Can Come Out Tax-Free

The money went into her 401(k) untaxed and grew untaxed. When she takes it out, it counts as ordinary income, so her adjusted gross income (AGI) is $24,150.

For someone who takes the standard deduction, taxable income is what’s left after subtracting the standard deduction and the additional senior deduction from AGI. Her $24,150 of income minus $24,150 of deductions leaves zero taxable income, and zero taxable income means zero tax.

Say she made those contributions while she was in the 22% bracket. Each dollar saved her 22 cents going in and costs her nothing coming out. That gap is the whole point of a traditional 401(k), and here it shows up in its clearest form.

What the Next $10,000 Will Cost

Now say she takes out $34,150. The deductions still cover the first $24,150, which leaves $10,000 of taxable income.

In 2026, the 10% bracket covers a single filer’s first $12,400 of taxable income. That puts all of it in that bracket, for a tax bill of $1,000, or about 3% of the whole withdrawal.

She can withdraw up to $36,550 before any of it is taxed at 12%. The 22% rate kicks in once taxable income tops $50,400.

This amounts to withdrawals above about $74,550. Around the same point, the senior deduction starts to shrink. It loses 6% of every dollar of modified AGI above $75,000.

Four Conditions Behind the $0 Result

1. Single filing status. The $2,050 add-on is only for unmarried filers. Married couples filing jointly start from a $32,200 standard deduction and add $1,650 for each spouse 65 or older. A married person filing separately loses the senior deduction completely.
2. Turning 65 by December 31. She must qualify as age 65 by the end of 2026. Under IRS rules, someone born on January 1, 1962, also qualifies because they’re considered 65 the day before their birthday.
3. A valid Social Security number. She must include a Social Security number valid for employment on her return to claim the $6,000 senior deduction.
4. No other income. Bank interest, dividends and part-time wages all add to her income. Ordinary income above the $24,150 threshold enters the 10% bracket, although qualified dividends can receive different tax treatment.

Three Tax Years to Capture Before Social Security Starts

For someone who turns 65 in 2026, the senior deduction covers 2026, 2027 and 2028. After that it expires.

Holding off on Social Security makes these three years worth more. Once benefits begin, any 401(k) withdrawal can make part of those benefits taxable. For single filers, up to 50% of benefits become taxable above $25,000 of provisional income, and up to 85% above $34,000. With benefits coming in, each extra 401(k) dollar can pull more of them into taxable income, so her real tax rate on that dollar ends up well above her bracket rate. Right now she has no benefits for withdrawals to drag in.

Medicare is the other piece. Its income-related monthly adjustment amount (IRMAA) generally uses income from two years earlier. The 2026 surcharge starts above $109,000 for single filers, so withdrawals around $36,550 are nowhere near that threshold. Her 2026 income will affect her 2028 premiums under the limits in effect then.

Moves to Make Before December 31

• Fill the 10% bracket beyond the $0 zone. Any money she doesn’t need to spend, up to $12,400, can go into a Roth IRA as a conversion. It’s taxed at 10% today and is money that later required minimum distributions can’t force out at higher rates. These quiet years between the last paycheck and the first RMD are the cheapest conversion window she will ever see, and we sized up how to use it in a free guide here.
• Take the withdrawal before December 31. Any 2026 deduction she doesn’t use is lost for good.
• Reset the target for 2027. The IRS has just released its new tax brackets. With a $16,600 standard deduction, a $2,100 age-65 add-on and the $6,000 senior deduction, she could withdraw $24,700 tax-free next year, assuming she has no other income.

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