Updated

Updated · 24/7 Wall St. · Oct 21

Couple’s $620,000 in 401(k)s Swells to $42,000 RMDs at 73 as IRS Bars One-Account Withdrawal

Updated

Updated · 24/7 Wall St. · Oct 21

Couple’s $620,000 in 401(k)s Swells to $42,000 RMDs at 73 as IRS Bars One-Account Withdrawal

Q: Why might delaying your first mandatory 401(k) withdrawal accidentally push you into a devastatingly high Medicare tax bracket?

Delaying your first 401(k) withdrawal can bunch two required minimum distributions into one calendar year, sharply inflating the income Medicare uses to set premiums. The rule lets your first RMD wait until April 1 of the year after you turn 73, but your second RMD is still due by Dec. 31 of that same year. That means two taxable withdrawals can hit one tax return. Because 401(k) RMDs are taxed as ordinary income, the doubled withdrawal can push modified adjusted gross income over Medicare’s IRMAA thresholds. Medicare Part B and Part D premiums rise in steps, not gradually, so going even slightly over a threshold can trigger a much higher monthly charge for the full year. In the highest tier, Part B alone can reach about $689.90 a month per person in 2026, plus a separate Part D surcharge. The sting is worse because Medicare looks back two years. A large two-RMD year at 74 can raise premiums at 76. Retirees may not connect the later Medicare bill to the earlier withdrawal decision, but the link is direct. In the couple’s example, a combined first-year RMD around $42,000 already adds meaningfully to taxable income. If that amount is stacked with the next year’s RMD, along with pension income, Social Security and investment income, it can be enough to cross an IRMAA cliff. That is why planners often urge retirees to take the first RMD in the year they turn 73 rather than delay it.

1 articles · Updated · 24/7 Wall St. · Oct 21

$620,000 split between two 401(k)s at retirement can grow to about $1.11 million by age 73, forcing roughly $42,016 in first-year required minimum distributions for a couple living on a pension.
A 5% annual return over 12 untouched years nearly doubles the balances, and the IRS Uniform Lifetime Table’s 26.5 distribution factor at 73 turns that growth into about $3,501 a month of taxable withdrawals.
401(k) rules require each spouse to take RMDs from their own plan, so about $27,107 must come from his account and $14,909 from hers rather than from one larger balance.
Missing her share could trigger a 25% excise tax of about $3,727, reduced to 10% if corrected in time, while IRAs offer more flexibility because each owner can aggregate withdrawals across their own IRA accounts.
The report points to three ways to soften the hit before 73: roll old 401(k)s into IRAs, use lower-income pension years for Roth conversions, and avoid delaying the first RMD into the next tax year.