Most retirement content focuses entirely on the accumulation side — contribute more, invest wisely, hit your number. Almost none of it deals with the part that actually determines the tax bill in retirement: what happens when the money has to come out, whether someone wants it out yet or not.
Two federal rules govern that side specifically, and both have real, checkable numbers behind them rather than rules of thumb.
The Withdrawals the IRS Requires, Not Just Allows
Money in a traditional IRA, SEP IRA, SIMPLE IRA, or an employer plan like a 401(k) can’t stay there indefinitely. Roth IRAs and designated Roth accounts are the exception during the original owner’s lifetime; everything else is subject to required minimum distributions once the account owner reaches a specific age.
Per the IRS’s RMD guidance, that age is 73, and the first RMD has a deadline of April 1 of the following year (every RMD after that is due by December 31). The RMD amount itself isn’t arbitrary — it’s the account balance at the end of the prior year divided by a life-expectancy factor from the IRS’s Uniform Lifetime Table, which is why the required percentage rises gradually each year as that factor shrinks.
Skipping an RMD, or taking less than required, carries a real penalty: a 25% excise tax on the shortfall, reduced to 10% if the mistake is corrected within two years. That’s steep enough that “I’ll deal with it later” isn’t a viable strategy once RMDs start.
Social Security Benefits Can Be Taxed Too
A separate and frequently underestimated rule: Social Security retirement benefits themselves can be federally taxable, depending on total income in retirement.
Per the Social Security Administration, federal income tax applies to benefits once combined income — defined as 50% of the benefit amount plus any other income — exceeds $25,000 for someone filing individually, or $32,000 filing jointly. Because RMDs count as income for this calculation, a large RMD in a given year can be the exact thing that pushes Social Security benefits into taxable territory that same year. The two rules aren’t independent; they interact.
Why This Belongs in the Planning Conversation, Not Just the Filing-Season One
Because RMDs and Social Security taxation interact, the sequence of withdrawals in retirement — which accounts get tapped first, and when Social Security is claimed relative to when RMDs begin — can meaningfully change the total tax bill across a retirement, not just in any single year. That’s a genuinely individual calculation involving account types, other income sources, and filing status, not something a general percentage can answer.
SSA also allows benefit recipients to have federal tax withheld directly from monthly payments — 7%, 10%, 12%, or 22% — as an alternative to owing a lump sum at filing time, which is a straightforward way to avoid a surprise bill once benefits do become taxable.
This article is for educational and informational purposes only and is not personalized financial or tax advice. Rules and thresholds cited above are current federal rules as of publication and are subject to change; consult a licensed tax professional or financial advisor about your specific situation, and read the full financial disclaimer before making retirement withdrawal decisions.
