Tax on 401K

[jlf58]

I just retired this month. If in 2026 I only collect SS and don't work, if I withdraw lets say $20,000 from my 401K , since it's considered income and 20k falls below the amount taxed, does that mean I don't pay any federal tax on it ? I live in Florida so no State taxes already.

 

[CO skier]

I just retired this month. If in 2026 I only collect SS and don't work, if I withdraw lets say $20,000 from my 401K , since it's considered income and 20k falls below the amount taxed, does that mean I don't pay any federal tax on it ? I live in Florida so no State taxes already.

Not sure what you mean by "20k falls below the amount taxed"

You would pay federal taxes on the combined SS, 401K withdrawal income, pension income, dividend income, interest income, and other income. How much of the SS is taxed depends on the combined income.

 

[jlf58]

Not sure what you mean by "20k falls below the amount taxed"

You would pay federal taxes on the combined SS, 401K withdrawal income, pension income, dividend income, interest income, and other income. How much of the SS is taxed depends on the combined income.

I know if I don't work at all and just collect SS, it's not taxed. Just trying to figure out if I just have SS and take out 20k, what would be the federal tax rate

 

[WorldT]

For your social security income, only half of what you collect is counted as income and whether or not it is subject to the income limits calculated as noted below:
Fifty percent of a taxpayer's benefits may be taxable if they are:

Filing single, head of household or qualifying widow or widower with $25,000 to $34,000 income.
Married filing separately and lived apart from their spouse for all of 2020 with $25,000 to $34,000 income.
Married filing jointly with $32,000 to $44,000 income.

Up to 85% of a taxpayer's benefits may be taxable if they are:

Filing single, head of household or qualifying widow or widower with more than $34,000 income.
Married filing jointly with more than $44,000 income.
Married filing separately and lived apart from their spouse for all of 2021 with more than $34,000 income.
Married filing separately and lived with their spouse at any time during 2021.

How much is subject to taxation is based on how much deductions you have. Assuming you only have standard deduction and nothing else (also presuming you are over 65), the following are the numbers for 2025 tax year:

$15,750 - standard deduction
$2,000 - additional for over 65
There should be an additional amount (something in the region of 6k?) for certain seniors under a certain income threshold that was passed recently. I don't know if that has been finalized yet.

So you have to take your social security income, add it to your 401k to see where you stand. Even if you are passed the threshold, you still have to subtract your deductions to figure out if any of your income will be subject to taxes.

 

[Janann]

I just retired this month. If in 2026 I only collect SS and don't work, if I withdraw lets say $20,000 from my 401K , since it's considered income and 20k falls below the amount taxed, does that mean I don't pay any federal tax on it ? I live in Florida so no State taxes already.

It sounds like you are thinking that there is no tax on Social Security, so it is removed from your total income. This is definitely not the case. In the example you gave, your taxable income will be:

Social Security income (although some will be excluded from taxation)
+ 401K distribution
+ any other income you have
= total taxable income

If your taxable income is low enough, and deductions are high enough, you won't owe any tax. You haven't provided enough information to know for sure. WorldT in post #4 provided a good explanation.

 

[Emmjay]

There is a very good free tax calculator at dinkytown.net that I use about this time each year to start estimating my income tax. I hate surprises.

You can plug in different scenarios to see how much your financial decisions will affect the bottom line, like deciding how much to convert to Roth, 401k and IRA withdrawals, donations, when to start SS, etc.

It’s the best I have found without purchasing tax software.

 

[isisdave]

I think if you're Married Filing Jointly, that amount of income will be less than the standard deduction. If you're single, it'll be closer, depending on the amount of your SS. Your tax rate on the small amount that might exceed the deduction is 10%.

Since you're talking about 2026, use an estimator as suggested above, or if you do your own taxes, set up a tentative 2026 scenario either now or when you do your taxes this year.

 

[sue1947]

As others have stated, it is your total income from all sources that determines your tax rate. In addition, your medicare premiums are also determined by your income. And then there is the Required minimum distribution in your 70's that can push your tax rate up again. The latter is the amount you are required to take from your regular (not Roth) IRA/401K and can result in a big tax hit. This is one of the reasons it is recommended to delay taking social security. You let that amount go up by 8% for each year you delay until 70, and live on money taken from the 401K/IRA. You determine how much to take out depending on your needs and tax bracket. You can also use this time to rollover from your regular 401K to a Roth IRA which is then exempt from the required minimum distribution. This reduces your future tax hit via the RMD while providing a guaranteed 8% growth on your SS.

Bottom line, you need to do some tax planning. There are a lot of moving parts and you might benefit from a talk with a fiduciary tax planner. At the very least, run your numbers through the calculators mentioned above or do a sample tax return via tax software.

And that $6000 deduction is just that. If you are within a limited age bracket (65 to I think 69), you can take a deduction on your taxes. It doesn't really have anything to do with SS. It was portrayed by some as making SS tax free, but that isn't true.

 

[Janann]

You can also use this time to rollover from your regular 401K to a Roth IRA which is then exempt from the required minimum distribution.

*And pay the federal tax that is due in the same year that the money is moved from a 401K to a Roth.

 

[Sandi Bo]

Here's another good calculator: https://www.aarp.org/money/taxes/1040-tax-calculator/

 

[SmithOp]

And that $6000 deduction is just that. If you are within a limited age bracket (65 to I think 69), you can take a deduction on your taxes. It doesn't really have anything to do with SS. It was portrayed by some as making SS tax free, but that isn't true.

It's available to everyone 65 and over, I think you confused the age because it's only for four years, so if you are 65 it will only last until you are 69.

Here are the details:

When considering a "$6000 budget bill deduction," it likely refers to a new temporary tax deduction for seniors (age 65 and older) introduced in the One Big Beautiful Bill Act.

Here's what you need to know about this deduction:

Amount: The maximum deduction is $6,000 per eligible individual, meaning a qualifying married couple filing jointly can deduct up to $12,000.
Eligibility: To qualify, you must be age 65 or older by the end of the tax year, and meet certain Modified Adjusted Gross Income (MAGI) thresholds: less than $175,000 for single filers and less than $250,000 for joint filers. The deduction begins to phase out at MAGI over $75,000 for single filers and $150,000 for joint filers.

Availability: This deduction is available whether you itemize or take the standard deduction. It's in addition to the existing extra standard deduction for seniors ($2,000 for single filers and $1,600 per qualifying spouse for joint filers in 2025).
Duration: The deduction is effective for the 2025 tax year and is scheduled to expire after the 2028 tax year.

Base Standard Deduction: The amount everyone receives, determined by filing status.
Single: $15,750
Married Filing Separately: $15,750
Married Filing Jointly: $31,500
Head of Household: $23,625
Additional Deduction for Seniors and the Blind (Existing Law):
Single or Head of Household (age 65 or older or blind): Additional $2,000.
Single or Head of Household (age 65 or older and blind): Additional $4,000.
Married Filing Jointly or Separately (age 65 or older or blind, per qualifying person): Additional $1,600.
Married Filing Jointly or Separately (age 65 or older and blind, per qualifying person): Additional $3,200.