At 73, His 401(k) Will End the Year at $1.2 Million. The Balance Will Set a $45,000 Required Withdrawal, and That RMD Will Set His Medicare Premium Two Years After He Takes It

As he approaches his 73rd birthday, a man will see his 401(k) balance reach approximately $1.2 million by the end of 2026. This substantial amount will necessitate a required minimum distribution (RMD) of about $45,283, calculated using the IRS's Uniform Lifetime Table. This distribution is mandatory, regardless of whether he needs the funds or not. The divisor used for this calculation, which is 26.5 for individuals aged 73, decreases each year, leading to larger required withdrawals as he ages.

In a discussion on the Clark Howard Podcast in June 2026, a listener with a 401(k) valued at $1.5 million expressed concerns about the financial implications of RMDs, stating, "If I don’t do anything, RMD is going to be very painful." The impact of RMDs extends beyond immediate withdrawals; it also influences Medicare premiums two years later based on income levels.

The RMD taken in 2027 will affect Medicare costs in 2029. Medicare applies Income-Related Monthly Adjustment Amount (IRMAA) surcharges based on modified adjusted gross income (MAGI), which includes adjusted gross income from tax returns and tax-exempt interest. The Social Security Administration typically assesses premiums based on tax returns from two years prior. Therefore, the 2027 RMD will have repercussions for the 2029 premium costs.

While only about 8% of Medicare Part B recipients incur IRMAA surcharges, the couple’s estimated MAGI, which stands at roughly $190,000 before the RMD, could exceed the threshold when the RMD is included. After adding the RMD, their joint MAGI would rise to $235,283, surpassing the $218,000 threshold for avoiding IRMAA by $17,283.

The IRMAA system operates on a cliff basis, meaning that exceeding a threshold by even a single dollar results in the full surcharge for that tier. For the lowest tier, each spouse would incur an additional $81.20 for Part B and $14.50 for Part D, totaling $1,148.40 per person annually. This adds up to $2,296.80 for the household, not including taxes on the RMD itself. Although the income brackets adjust for inflation, the required withdrawals will also increase as the divisor continues to decrease.

A significant risk arises if one spouse passes away, as the surviving spouse would file as single, with a threshold of only $109,000, which is half of the joint figure. This situation could push the survivor into a higher IRMAA bracket due to the same RMD, combined with a pension and the taxable portion of Social Security benefits.

To mitigate these financial impacts, retirees are encouraged to consider three strategic moves before their RMD is due:

• Consider rolling the 401(k) into an IRA before the end of 2026 and utilize qualified charitable distributions (QCDs). QCDs must come from an IRA and can count toward the RMD while being excluded from AGI. If the couple donates to charity, directing at least $17,283 of the 2027 RMD to charity could help keep their joint MAGI below the current threshold of $218,000. The limit for QCDs in 2026 is $111,000 per person.
• Take the first RMD in 2027. Although the first RMD can be delayed until April 1 of the following year, postponing it could result in two RMDs in 2028, potentially raising premiums for 2030 significantly.
• If still in their 60s, retirees should project their RMDs early. This can be done by dividing the expected year-end balance before the first RMD year by the appropriate factor from the Uniform Lifetime Table. Adding in taxable income from Social Security, pensions, and dividends will help gauge whether they are close to IRMAA thresholds. This period before the first RMD is the most advantageous time for partial Roth conversions, which can help reduce the balance impacting future RMDs.

The formula for RMDs is fixed, but retirees have the opportunity to influence how much of their income appears in MAGI by planning ahead. This is one of several IRS regulations that can significantly impact retirement savings over the long term, and there are resources available to help navigate these complexities.

For further inquiries or corrections, readers are encouraged to reach out via email.