Baby Boomers average $267,900 in workplace retirement plans, but every untaxed dollar faces mandatory IRS withdrawals starting at age 73.
Combined RMDs and Social Security income can push a retired couple from the 12% to 22% tax bracket in a single year.
Roth conversions, early pre-tax withdrawals, and QCDs up to $108,000 annually give retirees three tools to shrink future RMD tax bills.
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The average American in the 65-to-69 age bracket has roughly $251,400 saved in their 401(k), according to Fidelity’s most recent analysis. Baby Boomers as a generation are sitting on slightly more, with an average balance of $267,900 in workplace plans and an average IRA balance of $257,002. On paper, that looks like a workable nest egg heading into retirement. The problem is what happens eight years later, when the IRS stops letting that money sit untouched.
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The Balance Looks Fine. The Tax Treatment Is the Catch.
Every dollar in a traditional 401(k) or IRA has never been taxed. The government deferred the bill rather than passing it. Under current rules, required minimum distributions begin at age 73, and the first withdrawal is due by April 1 of the year after a retiree turns 73. The distribution is calculated using an IRS life expectancy table, and the amount lands on the tax return as ordinary income, whether the retiree needs the cash or not.
This is the tax consequence that arrives at 73. A retiree who spent years thinking of their 401(k) as “their money” discovers that a portion must be withdrawn and taxed on a schedule the IRS sets.
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Where the 2026 Brackets Actually Bite
The 2026 federal tax brackets tax a single filer at 12% on income over $12,400, 22% on income over $50,400, and 24% on income over $105,700. For married couples filing jointly, the 22% bracket starts at $100,800 and the 24% bracket at $211,400. The standard deduction for joint filers is $32,200, and $16,100 for singles. Consider a 73-year-old couple with $500,000 combined in pre-tax accounts, plus Social Security.
The first distribution is a small slice of the balance, but it stacks on top of benefits and any interest or CD income. The 1.65% national average 12-month CD rate looks harmless on its own, and the 4.44% yield on the 10-year Treasury remains modest. Combined with a distribution, these sources can push a household from the 12% bracket into the 22% bracket in a single tax year.
Social Security Gets Pulled In Too
The second layer of the surprise is that distribution income can make Social Security itself taxable. Up to 85% of benefits become taxable once combined income crosses relatively low thresholds that have not been indexed for inflation in decades. A retiree collecting an average benefit, boosted by the 2.5% 2026 COLA, may have assumed those checks were tax-free. Adding a distribution on top often changes that math.
The broader pressure on households is notable. The personal savings rate has fallen from 6.2% in early 2024 to 3.9% in the first quarter of 2026, while per capita disposable income has climbed to $68,391. Households are earning more and saving less, which leaves fewer levers to pull once distributions begin.
What a 65-Year-Old Can Do in the Eight-Year Window
The years between 65 and 73 are the planning window. A few options that the data supports:
Partial Roth conversions. Moving money from a traditional IRA to a Roth IRA in years with lower taxable income locks in today’s rate and removes those dollars from future RMD calculations. Roth IRAs are not subject to RMDs during the owner’s lifetime.
Delay Social Security, spend down pre-tax accounts first. Drawing from the 401(k) between 65 and 70 shrinks the balance that will be subject to RMDs at 73, while delayed Social Security benefits grow roughly 8% per year until age 70.
Qualified charitable distributions after 70½. A QCD sends up to $108,000 in 2026 directly from an IRA to a qualifying charity, satisfies the RMD, and never appears as taxable income.
The tax code treats a traditional retirement account as a shared asset with a deferred bill, and the bill comes due on a fixed schedule starting at 73. Households that treat the years before then as ordinary retirement years, rather than as a planning window, tend to face a larger tax bill than expected.
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