Taking $10,000 from a traditional IRA might seem like a simple way to cover a
vacation, home repair, or other retirement expense. But once you’re collecting
Social Security, that withdrawal can potentially increase your federal tax bill
in more than one way, leaving less spendable income than you expected. It’s an
interaction worth considering as part of your retirement
plan since the surprise comes from a formula many retirees don’t see until
tax time.
The withdrawal doesn’t reduce your senior benefits directly — it can reduce
how much of your total retirement income you keep after federal taxes.
Here’s what you need to know.
IRA withdrawals can make more Social Security taxable
The IRS determines whether Social Security benefits are taxable using an income
calculation often called provisional or combined income. In simplified terms, it
includes your adjusted gross income (AGI) before Social Security, tax-exempt
interest, and half of your annual Social Security benefits.Â
Because taxable
traditional IRA distributions generally enter gross income, taking more from an
IRA can push that calculation higher. That can cause part of your previously
untaxed Social Security benefits to become taxable too.
So a $5,000 withdrawal doesn’t always mean only $5,000 more taxable income.
Depending on where you fall within the Social Security formula, the withdrawal
can also pull additional benefits into taxable income, further reducing your net
income.
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The income thresholds haven’t kept pace with inflation
For single filers, Social Security benefits can begin becoming taxable when
combined income exceeds $25,000, with up to 85% of benefits potentially taxable
once income exceeds $34,000. For married couples filing jointly, the
corresponding thresholds are $32,000 and $44,000.Â
An 85% taxable figure doesn’t
mean an 85% tax rate — it means up to 85% of your benefits can be included in
taxable income and then taxed at your applicable federal rate.
Those numbers have stayed remarkably still. The first tier took effect in 1984,
the second was added in 1993, and neither is indexed for inflation or wage
growth. As Social Security COLAs, pensions, IRA withdrawals, and other income
rise over time, more retirees can drift across thresholds that don’t move with
them.
RMDs can force additional taxable income
Retirees can sometimes control how much they withdraw from an IRA early in
retirement, but eventually required minimum distributions, or RMDs, can reduce
that flexibility.Â
The IRS generally requires traditional IRA owners subject to
the current age-73 rules to withdraw a calculated amount each year, even if they
don’t need the cash for spending. People born in 1960 or later generally have an
applicable RMD age of 75 under current law.
Because traditional IRA distributions are generally taxable, an RMD can raise
combined income and potentially make more Social Security taxable. That makes
the years before RMDs begin particularly useful for planning rather than waiting
until mandatory withdrawals dictate your taxable income.
Roth accounts and QCDs can offer more flexibility
Roth money works differently. Qualified Roth IRA distributions aren’t included
in gross income, so they generally don’t increase the income calculation used to
determine taxable Social Security benefits. Some retirees therefore consider
partial Roth conversions during lower-income years before Social Security or
RMDs begin, although the conversion itself generally creates taxable income in
the year it’s completed.
Charitably inclined retirees have another option after age 70 1/2. A qualified
charitable distribution (QCD) sends IRA money directly to an eligible charity,
can satisfy all or part of an IRA RMD, and generally keeps the qualifying
distribution out of taxable income. That can be more helpful to the Social
Security calculation than taking the RMD personally and later writing a
charitable check.
The new senior deduction doesn’t change the formula
The One Big Beautiful Bill Act (OBBBA) created an enhanced deduction of up to
$6,000 per eligible taxpayer age 65 or older, or $12,000 for a qualifying
married couple, for tax years 2025 through 2028. That deduction can lower
taxable income and potentially reduce the final tax bill. But it doesn’t change
the provisional-income calculation or raise the $25,000, $32,000, $34,000, and
$44,000 Social Security thresholds.
Large IRA withdrawals can create another ripple as well. Medicare’s
income-related monthly adjustment amount, or IRMAA, can increase Part B and Part
D costs when modified adjusted gross income crosses certain levels, and the
Social Security Administration generally bases that determination on tax
information from two years earlier. So, a large IRA withdrawal this year could
therefore affect Medicare premiums later.
Bottom line
Would you still take the same amount from your traditional IRA this year if you
knew the withdrawal could make more of your Social Security taxable and
potentially affect future Medicare premiums? That doesn’t mean avoiding IRA
withdrawals altogether — they’re often an essential part of retirement — but
timing and account choice can matter more than the withdrawal amount alone.
Before making a large distribution, map your projected income against the Social
Security thresholds and consider how traditional IRA, Roth, and taxable-account
withdrawals interact. A tax professional can help model those moving parts based
on your situation, and planning before the money comes out may help you keep more of your money
rather than discovering the added tax after year-end.
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Author Details
Adam Palasciano
With six years of experience covering personal finance, Adam Palasciano specializes in retirement planning. He helps readers make smarter investment decisions as retirement approaches and find ways to make their savings last longer once they get there. He also breaks down complex topics like Social Security benefits and taxes so readers can better understand how to maximize the income they’ll rely on later in life.
