A 401(k) Millionaire’s First RMD Is About $37,700. Add a $40,000 Social Security Benefit and 85% of the Benefit Turns Taxable the Same Year

A $1 million traditional 401(k) retirement account requires a first required minimum distribution (RMD) of roughly $37,700 at age 73. When combined with a $40,000 Social Security benefit, 85% of the Social Security check ($34,000) becomes taxable income due to the tax torpedo effect. This occurs because the IRS uses the provisional income formula, which was written in 1983 and updated in 1993, and has not been adjusted for inflation since then.

Required minimum distributions are calculated using the IRS Uniform Lifetime Table, resulting in a divisor of 26.5 at age 73. For a $1 million traditional IRA or 401(k) balance, the first-year RMD is approximately $37,736. Missing the RMD deadline incurs a 25% penalty, which can be reduced to 10% if corrected promptly. The tax torpedo occurs because each additional dollar of RMD further adds 85 cents of taxable Social Security income.

Three strategies can mitigate the impact: Roth conversions during pre-RMD years, qualified charitable distributions (QCDs) from IRAs to charity that avoid adding to adjusted gross income, and careful withdrawal timing and account ordering to keep provisional income below the 85% taxable threshold.