The Tax Problem Nobody Warns You About

Many retirees are surprised to learn that once Social Security, required minimum distributions, and possibly a pension all arrive at the same time, a large share of their income can suddenly become taxable.

Up to 85 percent of Social Security benefits can be subject to federal income tax if your combined income — adjusted gross income plus nontaxable interest plus half your Social Security — exceeds 34,000 dollars for single filers or 44,000 dollars for couples.

Add an RMD from a sizable IRA and the picture gets sharper: a retiree with a 500,000 dollar IRA turning 73 may face a first-year RMD of around 18,868 dollars, which pushes combined income well above those thresholds for many households.

The goal of coordinating these two income streams is not to avoid paying your fair share, but to smooth your taxable income across years and avoid bracket jumps that cost far more than necessary.

Using the Gap Years Before RMDs Begin

The years between retirement and the start of RMDs at age 73 — often your late 60s and early 70s — are a strategic window that many retirees underuse.

If you retire at 65 but delay Social Security until 70, and your other income is modest, your taxable income during those five years may be unusually low compared to your future retirement income once RMDs begin.

Those low-income gap years are often an ideal time to make Roth IRA conversions, moving money from a traditional IRA to a Roth at your current lower tax rate, permanently shrinking the balance that will later be subject to RMDs.

Even converting 20,000 to 40,000 dollars per year during a five-year gap can meaningfully reduce future RMDs and the cascade of higher taxes that can follow when multiple income sources arrive simultaneously.

Key insight: The years between retirement and the start of RMDs at 73 are your most powerful window for tax planning — Roth conversions made during this period can reduce mandatory withdrawals and their tax impact for the rest of your life.

How Social Security Timing Affects the Tax Equation

Delaying Social Security to age 70 is well known for boosting your monthly check, but it also has a tax dimension: during the years you delay, you typically have lower income, which lowers the tax cost of IRA withdrawals or Roth conversions in that period.

Once you do start Social Security at 70 alongside your RMDs at 73, both income streams arrive together, but your Social Security benefit will be 24 percent higher than at 67, giving you more guaranteed income to cover essential expenses without needing as many additional withdrawals from taxable accounts.

By contrast, claiming Social Security at 62 while also taking IRA withdrawals to cover living expenses can keep your income spread across more years, but it also permanently reduces your benefit and your future survivor benefit if you are married.

The right timing depends on your health, your spouse's situation, your account balances, and your tax bracket, so modeling a few specific scenarios with actual numbers is more useful than following any single rule.

Watching for the IRMAA Threshold

One practical concern when coordinating Social Security and RMDs is the Medicare income-related monthly adjustment amount, known as IRMAA, which raises your Part B and Part D premiums if your income from two years prior exceeds certain thresholds.

For 2025, the IRMAA threshold starts at 106,000 dollars of modified adjusted gross income for single filers and 212,000 dollars for couples, and crossing it can add hundreds of dollars per month to your Medicare costs.

A large RMD combined with Social Security income can push some retirees over the IRMAA line unexpectedly, so it is worth estimating your income two years ahead when planning large conversions, asset sales, or voluntary retirement account withdrawals.

If a one-time income event such as a home sale or large conversion does push you over the threshold temporarily, you can appeal your IRMAA surcharge with Medicare using Form SSA-44 if your circumstances have since changed.

Building a Written Coordination Plan

Start by listing your projected income sources and ages: Social Security at your chosen claiming age, RMDs beginning at 73, any pension, and planned part-time work, along with the estimated tax impact of each.

Then identify any low-income gap years where Roth conversions or voluntary IRA withdrawals could reduce future mandatory distributions without pushing you into a higher bracket or over IRMAA thresholds.

Review your plan annually as account balances, tax laws, and your personal circumstances change — what made sense at 68 may need adjustment at 71 as your RMD start date approaches.

Working with a tax-aware financial planner or CPA who understands the interaction between Social Security, RMDs, and Medicare costs can help you avoid the most common and costly coordination mistakes in retirement.

Related reading: RMD rules at 73 · full retirement age