A single retiree turns 75 this year holding $2.1 million in a traditional 401(k) and collecting $4,000 a month from Social Security. The plan was simple: live on Social Security, take the required minimum distribution, stay in the 22% bracket the way the spreadsheet promised back at 65. The 2026 numbers say otherwise. The RMD alone pushes the top slice of income into the 24% bracket, and every year that follows compounds the problem.<\/p>\n
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scyther5 \/ Getty Images The $85,400 Number the Spreadsheet Missed <\/p>\n
At 75, the IRS Uniform Lifetime Table divisor is 24.6. Divide a $2.1 million balance by that divisor and the first-year RMD lands at roughly $85,366, call it $85,400. That distribution is fully ordinary income. There is no choice about taking it, no way to defer it, and no offset short of a qualified charitable distribution.<\/p>\n
Stack the Social Security on top. With $48,000 in annual benefits and a six-figure RMD, the combined-income formula maxes out, so 85% of benefits, or $40,800, becomes taxable. Gross taxable income before deductions: $126,200.<\/p>\n
For 2026, a single filer over 65 gets the $16,100 standard deduction plus the $2,050 age add-on, a total of $18,150. That leaves about $108,050 in taxable income.<\/p>\n
Where the 24% Bracket Bites <\/p>\n
The 2026 single brackets, as released in Revenue Procedure 2025-32, run 22% on income above $50,400 and 24% on income above $105,700. Taxable income of $108,050 sits just inside the 24% bracket. The top roughly $2,350 of income is taxed at the higher rate. The headline damage is modest in dollar terms this year, but the mechanic is what matters: a $2.1 million traditional balance, by itself, has crossed the line.<\/p>\n
This is the part that surprises retirees who modeled retirement at 65 assuming a flat 22%. The bracket move also has knock-on effects. The two-year IRMAA lookback means this year’s return drives Medicare Part B and Part D surcharges in 2028. Crossing the first IRMAA tier adds $70 to $100 per month to Part B alone, before any Part D adjustment.<\/p>\n
Are you ahead, or behind on retirement? SmartAsset’s free tool<\/a> can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; learn more here.<\/a><\/p>\n The Curve Steepens Every Year <\/p>\n The trap is the compounding. Portfolio balances at this size commonly grow 5% to 7% in a normal year, and with the 10-year Treasury at 4.55% even a conservative sleeve throws off real income. Meanwhile the Uniform Lifetime divisor shrinks every year. Suze Orman has walked through the same arithmetic on her podcast for a hypothetical retiree starting RMDs at 75: the first year is around $58,000, then $60,000, then $62,000, climbing roughly $2,000 to $3,000 annually. On a $2.1 million base, every step on that curve is larger, and the marginal rate climbs with it.<\/p>\n Three Moves That Change the Math <\/p>\n Run partial Roth conversions in the gap years. For retirees still pre-RMD, the window between retirement and age 73 is the cheapest tax real estate they will ever own. Convert enough each year to fill the 22% bracket (up to $105,700 of taxable income for single filers in 2026) and the future RMD base shrinks. As Orman put it, “The more you get to convert, the less your RMDs are going to be as well.”<\/p>\n Use QCDs to satisfy part of the RMD. A qualified charitable distribution sent directly from the IRA to a 501(c)(3) counts toward the RMD but never hits adjusted gross income. For a charitably inclined 75-year-old, a $20,000 QCD trims the taxable RMD, keeps income under the 24% threshold, and protects the IRMAA position two years out.<\/p>\n Fix asset location before the next rebalance. High-growth equities belong in the Roth, where future appreciation escapes RMDs entirely. Bonds and slower-growth holdings can sit in the traditional 401(k), where their lower compounding keeps the RMD base from ballooning. Same portfolio, smaller forced distribution.<\/p>\n The real problem is leaving every dollar inside the traditional account until the IRS sets the withdrawal schedule. At 75, options narrow. At 65, they do not.<\/p>\n If You\u2019ve Been Thinking About Retirement, Pay Attention (sponsor) <\/p>\n Retirement planning doesn\u2019t have to feel overwhelming. The key is finding expert guidance, and SmartAsset\u2019s simple quiz makes it easier than ever for you to connect with a vetted financial advisor. Here\u2019s how:<\/p>\n Answer a Few Simple Questions.\u00a0<\/p>\n Get Matched with Vetted Advisors\u00a0<\/p>\n Choose Your \u00a0Fit\u00a0<\/p>\n