From 24/7 Wall St. · Gerelyn Terzo · · 1m 10s
Retirees May Spend $900k 401(k) Before Social Security
Retirees can spend $900,000 from traditional 401(k) before Social Security starts to avoid high taxes.
In brief
Retirees can spend $900,000 from traditional 401(k) before Social Security starts to avoid high taxes. Retirees with $900,000 traditional 401(k) may withdraw funds before Social Security starts to use tax-free deduction room. Originally reported by 24/7 Wall St..
Tax-Free Window for Retirees
Retirees may spend $900,000 from traditional 401(k) before Social Security starts to avoid high taxes.
Tax Deduction Covers First Withdrawals
Under 2026 rules, married couples get a $32,200 deduction that cancels out first withdrawals.
Tax Bill Depends on Timing
Taxable distributions from 401(k) are taxed at rates based on the household's income that year.
Spending vs. Converting
Spending pays current bills; converting moves money to Roth accounts with no required withdrawals.
Early Drawdowns Risk 80s Shortfall
Spending first leaves less for later but preserves outside savings for 80s expenses.
Market Timing Matters
Market drops early in retirement force selling at low prices, worsening financial damage.
Check 10% Penalty Age
Both spouses must be past the age for 10% early-withdrawal penalty or qualify for exception.
Set Withdrawal Before December
Project this year's return and fill the $32,200 deduction room with 401(k) withdrawals before year-end.
What matters most
Retirees with $900,000 traditional 401(k) may withdraw funds before Social Security starts to use tax-free deduction room.
