High-Earning Couples Can Save $150,000 by Draining 401(k)s First and Delaying Social Security to 70
Updated
Updated · 24/7 Wall St. · May 21
High-Earning Couples Can Save $150,000 by Draining 401(k)s First and Delaying Social Security to 70
2 articles · Updated · 24/7 Wall St. · May 21
$2.5 million retirement savers turning 65 are better off spending traditional 401(k) balances before claiming Social Security, a strategy that can cut lifetime taxes and Medicare surcharges by $80,000 to $150,000.
The key threshold is Medicare's 2026 IRMAA cliff: joint MAGI above $218,000 triggers Part B and Part D surcharges, with a two-year lookback that can make one large withdrawal raise premiums later.
In the example, drawing $80,000 annually from a 401(k) from ages 65 to 70 keeps MAGI near $80,000; claiming Social Security at 70 lifts benefits from about $66,000 to $90,000 while total MAGI stays around $130,000.
Claiming at 65 instead lets the 401(k) grow into larger required minimum distributions after 73, pushing withdrawals above $110,000 on top of Social Security and often breaching the IRMAA threshold for both spouses.
The approach is strengthened by 2026 conditions—Fed funds at 3.75%, 10-year Treasury yields at 4.47%, and inflation near 2.1%—but it is less attractive for couples in poor health who may benefit from claiming earlier.
Why do many retirees resist a strategy that could save them over $100,000 in taxes and Medicare fees?
At what 401(k) balance does delaying Social Security actually start saving you money on Medicare and taxes?
Can a market crash make this popular retirement tax strategy a costly mistake for new retirees?