Retirees With Over $800,000 in a Traditional 401(k) Are Being Warned About This Social Security Clawback

"A retiree with $800,000 in a traditional 401(k) taking RMDs of $35,000 per year at age 75 must add that withdrawal to other income when calculating provisional income."

"The combined tax and premium impact can reduce the real value of Social Security by 20% to 30%."

"The difference between a retiree who ran Roth conversions during the gap years and one who did not is substantial."

"By 75, the account has grown, and RMDs are mandatory, which can lead to increased taxable income."

A traditional 401(k) balance of $800,000 can create tax challenges for retirees. Required minimum distributions (RMDs) increase provisional income, which can lead to up to 85% of Social Security benefits being taxable. For a retiree with $28,000 in Social Security and $35,000 in RMDs, taxable income can reach nearly $59,000. Additionally, Medicare surcharges based on modified adjusted gross income can further reduce the value of Social Security benefits by 20% to 30%. Roth conversions during retirement can mitigate these tax impacts significantly.

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