Retirees' $50,000 IRA Withdrawals Can Trigger Tax on 85% of Social Security
Updated
Updated · 24/7 Wall St. · May 31
Retirees' $50,000 IRA Withdrawals Can Trigger Tax on 85% of Social Security
2 articles · Updated · 24/7 Wall St. · May 31
$50,000 taken from a traditional IRA can leave a 70-year-old with $30,000 in Social Security owing about $6,200 in federal tax, even if benefits had previously been untaxed.
Thresholds set in 1984 drive the jump: combined income rises to $65,000, above the $34,000 upper limit for single filers, pulling $25,500 of Social Security into taxable income.
That extra inclusion creates roughly $2,900 of the bill beyond the ordinary tax on the IRA withdrawal itself, a surprise many retirees encounter in their first large distribution year.
Roth IRA withdrawals avoid the combined-income formula, while spreading withdrawals over multiple years, doing partial Roth conversions before age 73, or using qualified charitable distributions can limit the hit.
The broader risk is that one large traditional IRA withdrawal can effectively be taxed twice—once directly and again by exposing Social Security—making pre-withdrawal tax planning critical.
Could your IRA withdrawal unexpectedly increase both your taxes and Medicare premiums?
Can a new $6,000 senior tax break protect your Social Security benefits?
With Social Security benefits facing a 24% cut, could a new cap for high-earners be the solution?