Why a 64 Year Old Retiree Is Draining Her $1.1 Million 401(k) Early to Maximize a $5,181 Social Security Check at 70

A 64-year-old single retiree with $1.1 million in a traditional 401(k) can withdraw about $80,000 per year from age 64 to 70 to cover living expenses. Claiming Social Security earlier locks in a reduced benefit, while waiting increases the monthly amount through delayed retirement credits. During the bridge years, withdrawals are the only taxable income because there is no Social Security income and no wages. After the standard deduction, withdrawals can fall into lower federal tax brackets, and Social Security taxation does not apply. After Social Security begins, additional traditional 401(k) withdrawals can increase taxable income, potentially taxing up to 85% of benefits and pushing income above IRMAA thresholds, raising Medicare premiums.

"A 64-year-old single woman retires this year with $1.1 million in a traditional 401(k). She was a maximum earner. If she claims now, she locks into a reduced benefit. If she waits until her full retirement age of 67, her benefit tops out at $4,152 per month. If she waits until 70, delayed retirement credits push her benefit to the 2026 maximum of $5,181 per month, or $62,172 per year for life."

"Her plan is straightforward. From 64 to 70, she pulls roughly $80,000 per year from the 401(k). Over six years that is $480,000 drawn down, leaving $620,000 plus any growth. At 70, the Social Security check turns on and the 401(k) withdrawal rate drops sharply. The bridge years are the entire point. Because she has no Social Security income and no wages, her only taxable income is the 401(k) draw itself."

"After the 2026 standard deduction of $16,100 for a single filer, $80,000 of withdrawals lands her in the 12% and 22% brackets. None of her withdrawals trigger Social Security taxation, because she is not collecting Social Security yet. This is what most retirees miss. Once Social Security turns on, every additional dollar pulled from a traditional 401(k) can drag up to 85% of the benefit into taxable income and push modified adjusted gross income across the first IRMAA threshold."

"which adds $70 to $400 per month in Medicare Part B and D surcharges on top of the standard $202.90 Part B premium. A 22% bracket retiree who trips both effects faces an effect"

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