Gerelyn Terzo’s 24/7 Wall St. analysis, published October 21, 2026, at 7:00am ET, compares two 65-year-old couples taking $90,000 in 401(k) withdrawals. One has a projected federal income tax bill of $4,604; the other, $10,724.
For tax year 2026, filed in 2027, both couples file jointly. Each withdrawal is fully taxable, and neither couple itemizes deductions or claims credits. One couple relies on the account withdrawal alone. The other also receives $60,000 in Social Security benefits.
The difference is not the size of the withdrawal. It is the added income from the benefits, part of which the tax calculation includes alongside the account distribution.
The second couple receives more gross cash overall. Its tax estimate reflects that larger pool of income, not a higher tax rate applied to the $90,000 withdrawal by itself.
The benefits add taxable income to the withdrawal
The IRS explains in Publication 554 that as much as 85% of retirement benefits may be taxable when a household’s income is high enough. That percentage is the share included in taxable income, not a tax rate.
The IRS worksheet counts $51,000 of the second couple’s $60,000 in benefits as income. Added to the $90,000 withdrawal, that produces adjusted gross income of $141,000 before deductions.
The first couple has no benefit income adding to the return. Its account distribution is taxed once as income, while the other couple’s withdrawal sits alongside the taxable portion of its benefits.
Both couples use the same deductions, but start with different income
The comparison gives both households $47,500 in deductions. That total combines a $32,200 standard deduction for joint filers in 2026, a $3,300 additional standard deduction because both spouses are at least 65, and a senior deduction of $12,000 for the couple.
The enhanced senior deduction comes from the One, Big, Beautiful Bill. The IRS allows $6,000 for each eligible person age 65 or older from 2025 through 2028, so both spouses qualify in this example.
Subtracting $47,500 from the first couple’s $90,000 withdrawal leaves $42,500 in taxable income. Applying the 2026 tax brackets produces the projected $4,604 tax bill.
For the second couple, the $141,000 adjusted gross income includes the withdrawal and the taxable benefits. After the same $47,500 deduction, taxable income is $93,500, resulting in $10,724 in federal tax.
That adjusted gross income remains below the $150,000 level where the senior deduction begins phasing out for joint filers. For single filers, the phaseout is 6% of modified adjusted gross income above $75,000.
The bracket thresholds show how the taxable totals are applied
The 2026 married-filing-jointly figures cited in the comparison put the 12% bracket at $24,800 of taxable income, the 22% bracket at $100,800 and the 24% bracket at $211,400. The two couples’ taxable totals fall below the $100,800 threshold.
Those bracket figures apply to taxable income after deductions, not to the total cash a household receives. That is why comparing a withdrawal amount alone does not show the full tax calculation when one couple also has benefit income.
The second couple’s benefits have reached the 85% taxable-share limit in this scenario. A larger withdrawal or a Roth conversion would not make more of those benefits taxable, but it could push income toward the point where the senior deduction begins shrinking.
The worksheet can help test 2027 withdrawal plans
A period between leaving work and claiming benefits can offer a lower-income window for account withdrawals, because no benefits are being added to the taxable-income calculation. That does not establish the right claiming age for every household; the comparison notes that claiming at 65 may still suit the couple receiving benefits.
Before setting 2027 withdrawals, retirees can use the benefits worksheet in the IRS instructions for Form 1040 to estimate how an additional distribution would affect the taxable share. The calculation can also show whether added income could reduce the senior deduction.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
