What Is the Tax Rate on 401(k) Withdrawals After Age 65?

The tax rate on 401(k) withdrawals after age 65 is your ordinary federal income tax rate, which runs from 10% to 37% in 2026 depending on your total taxable income for the year. There is no separate rate for retirement money. Each dollar you pull from a traditional 401(k) stacks on top of your other income and is taxed at whatever bracket it lands in. The 10% early-withdrawal penalty is already behind you at 65, but the income tax itself never goes away on traditional 401(k) dollars.

Why 401(k) Money Is Taxed as Ordinary Income

Traditional 401(k) contributions went in before tax, and the account grew year after year without a tax bill. The bill comes when you withdraw. Every dollar you take out, both your original contributions and the investment gains, counts as ordinary income on your return.¹ The plan reports each distribution to the IRS on Form 1099-R, and it hits your return the same way wages would.

Because it’s ordinary income, a 401(k) withdrawal doesn’t qualify for the lower rates that apply to long-term capital gains or qualified dividends. A $50,000 withdrawal is taxed the same as $50,000 of salary. That surprises some retirees who assume retirement income gets a break. It doesn’t.

One rate-adjacent cost worth flagging: 401(k) distributions aren’t themselves subject to the 3.8% Net Investment Income Tax, but they raise your modified adjusted gross income. If you also have dividends, rental income, or capital gains, a large withdrawal can push that investment income above the NIIT threshold ($200,000 single, $250,000 joint) and trigger the surtax on the investment earnings.²

2026 Federal Tax Brackets

Federal income tax is progressive. Your first dollars of taxable income are taxed at 10%, and higher layers face higher rates. A 401(k) withdrawal is added on top of your other income and taxed at whichever brackets those extra dollars fall into. The 2026 brackets for single filers and married couples filing jointly:³

10%: Up to $12,400 single / $24,800 joint
12%: $12,401 to $50,400 / $24,801 to $100,800
22%: $50,401 to $105,700 / $100,801 to $211,400
24%: $105,701 to $201,775 / $211,401 to $403,550
32%: $201,776 to $256,225 / $403,551 to $512,450
35%: $256,226 to $640,600 / $512,451 to $768,700
37%: Over $640,600 / Over $768,700

Here’s how the stacking plays out. Take a married couple filing jointly with $60,000 in combined pension and Social Security income after deductions. That puts them in the 12% bracket. They withdraw $50,000 from a 401(k). The first $40,800 of that withdrawal fills out the rest of the 12% bracket, and the remaining $9,200 spills into the 22% bracket. Their marginal rate on the last dollar out is 22%, but the effective rate on the whole $50,000 is much lower because most of it was taxed at 12%. Watching where the bracket boundaries fall is one of the simplest ways to control the cost of a withdrawal.

Deductions That Shrink What’s Taxable

Before any of your income gets taxed, deductions come out. Most retirees take the standard deduction. For 2026, the base is $16,100 for single filers and $32,200 for married couples filing jointly.³

At 65 or older, you get an additional amount on top: $2,050 for single filers or heads of household and $1,650 per qualifying spouse for joint filers. A married couple where both spouses are 65 or older starts with a standard deduction of $35,500.

The One, Big, Beautiful Bill added a new enhanced senior deduction for tax years 2025 through 2028. If you’re 65 or older you can claim up to an additional $6,000, or $12,000 if both spouses on a joint return qualify. It phases out once modified adjusted gross income exceeds $75,000 single or $150,000 joint.⁴ Because 401(k) withdrawals raise your MAGI, a large distribution can reduce or eliminate this deduction.

How Withdrawals Make Your Social Security Taxable

A 401(k) withdrawal can also make part of your Social Security check taxable, which is a cost people rarely see coming. The IRS uses “provisional income” to decide how much of your benefit is subject to tax. Provisional income equals half of your Social Security benefits plus all your other income, including 401(k) distributions.⁵

The thresholds that trigger taxation of Social Security have never been adjusted for inflation:⁶

Up to 50% of benefits taxable: provisional income above $25,000 single or $32,000 joint
Up to 85% of benefits taxable: provisional income above $34,000 single or $44,000 joint

For a retiree sitting near a threshold, a $10,000 withdrawal doesn’t just add $10,000 of taxable income. It can also drag another $8,500 of Social Security benefits into the taxable pile, and the true tax cost on that withdrawal ends up well above the marginal rate alone would suggest.

Medicare IRMAA Surcharges

Medicare Part B premiums are income-tested, and 401(k) distributions count toward the income figure Medicare uses. The bill takes two years to arrive: a large withdrawal in 2026 raises your Part B premium in 2028.

For 2026, the standard Part B premium is $202.90 per month. Surcharges by individual MAGI (double the thresholds for joint filers) are:⁷

$109,001 to $137,000: $284.10/month
$137,001 to $171,000: $405.80/month
$171,001 to $205,000: $527.50/month
$205,001 to $499,999: $649.20/month
$500,000 or more: $689.90/month

At the top tier the surcharge adds nearly $5,850 per person per year. If you’re planning a large one-time distribution, the IRMAA hit can turn a single withdrawal into two years of elevated premiums.

State Income Tax

Federal tax is only part of the picture. Most states also tax 401(k) distributions as ordinary income at their own rates, which currently range from around 2% to over 13%. Eight states impose no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. A handful of additional states specifically exempt retirement plan distributions even though they tax other income. Your residence on the date of the withdrawal generally determines which state gets to tax it.

Required Minimum Distributions Start at 73

You don’t get to leave a traditional 401(k) alone forever. You must begin taking Required Minimum Distributions in the year you turn 73, if you were born before January 1, 2033. For those born in 1960 or later, the RMD age rises to 75 starting in 2033.⁸

The first RMD is due by April 1 of the year after you reach the RMD age. Every RMD after that is due by December 31.⁹ Delaying that first one into the following year means two RMDs land in the same calendar year, which can push you into a higher bracket or trigger IRMAA.

The RMD equals your account balance on December 31 of the prior year divided by a life expectancy factor from the IRS Uniform Lifetime Table. A separate table with a smaller required withdrawal applies when your sole beneficiary is a spouse more than 10 years younger.⁹

If you have more than one 401(k), each account’s RMD must be taken from that specific plan. Unlike IRAs, 401(k)s cannot be aggregated for RMD purposes.¹⁰ And if you’re still working past 73 for the employer that sponsors your 401(k), you can delay RMDs from that plan until you actually retire, unless you own 5% or more of the business. RMDs from old 401(k)s at former employers still apply on schedule.⁹

Missing an RMD triggers an excise tax of 25% of the shortfall. Correct the mistake within two years and file Form 5329 with the IRS, and the penalty drops to 10%.⁹

Withholding on Your Withdrawal

You pay tax on distributions throughout the year, not just at filing time. For a lump-sum or other one-time withdrawal that could have been rolled to another retirement account but isn’t, the plan administrator must withhold 20% for federal income tax. You can’t opt out; the only way around it is a direct rollover.¹¹

For recurring monthly or quarterly payments from the plan, the withholding amount is under your control using Form W-4P.¹² For one-time nonperiodic distributions that aren’t eligible rollover distributions, you adjust withholding with Form W-4R.

The 20% default on lump sums often isn’t enough. If your marginal rate is 24% or higher, or if the withdrawal triggers Social Security taxation and IRMAA surcharges, you can owe considerably more at tax time. The alternative is quarterly estimated payments on Form 1040-ES, due April 15, June 15, September 15, and January 15. To avoid underpayment penalties, pay at least 90% of the current year’s tax or 100% of last year’s tax, whichever is smaller (110% if your prior-year AGI was above $150,000).¹³ Withholding from a pension or Social Security check is treated as paid evenly across the year, so bumping up that withholding late in the year can still cover the annual requirement in a way estimated payments can’t.

The Roth 401(k) Exception

Everything above assumes a traditional 401(k). Roth 401(k) contributions were made with after-tax dollars, so at withdrawal the treatment flips. Both contributions and earnings come out tax-free as long as the distribution is “qualified,” which requires two things:¹⁴

At least five tax years have passed since January 1 of the year you first contributed to the Roth 401(k)
You’re at least 59½, disabled, or the withdrawal is by a beneficiary after death

At 65 the age requirement is already met. If your first Roth contribution was at least five years ago, every dollar comes out tax-free. If you don’t meet the five-year rule, your contributions still come out tax-free, but earnings are taxed as ordinary income.

Starting in 2024, Roth 401(k) accounts no longer require RMDs while the original owner is alive.¹⁵ Qualified Roth distributions are also excluded from AGI, so they don’t increase Social Security taxation, don’t count toward IRMAA thresholds, and don’t phase out the enhanced senior deduction. That makes Roth 401(k) dollars considerably cheaper to spend than traditional dollars, even when the headline rates look the same.

1
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
2
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
4
Internal Revenue Service. Check Your Eligibility for the New Enhanced Deduction for Seniors
5
Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable
6
Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
7
Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
8
Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners
9
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
10
Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
11
Internal Revenue Service. Pensions and Annuity Withholding
12
Internal Revenue Service. About Form W-4P, Withholding Certificate for Periodic Pension, Annuity, and Certain Other Deferred Compensation Payments
13
Internal Revenue Service. Form 1040-ES
14
Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
15
Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners