Retired Couple Uses Account Order to Avoid Federal Income Tax on $95,000
A retired couple with $1.4 million in savings can cover $95,000 of annual spending without owing federal income tax in 2026 by drawing $45,000 from Social Security, $20,000 from a traditional 401(k), and $30,000 from a Roth IRA. Keeping the 401(k) withdrawal low holds provisional income under $44,000, which prevents Social Security benefits from becoming taxable. Required minimum distributions starting at age 73 may later force larger 401(k) withdrawals and reduce this tax control.
The hypothetical spouses are both 67 and hold $1 million in a traditional 401(k) plus $400,000 in a Roth IRA, much of it built through earlier conversions. Their $95,000 budget is split among Social Security, a modest 401(k) withdrawal, and qualified Roth dollars.
For joint filers, provisional income includes other income plus half of Social Security. Staying below $44,000 limits how much of the benefit is taxed. The 2026 standard deduction for married couples is $32,200, and a temporary $6,000-per-spouse senior deduction for those 65 and older remains available through 2028. Required minimum distributions beginning at 73 will eventually force larger 401(k) withdrawals on the $1 million balance.
This example may resonate with retirees who hold most savings in traditional accounts and face Social Security taxation. It could encourage more households to plan withdrawal sequencing earlier, potentially reducing taxes but also concentrating complexity among those with enough assets to choose. Because required minimum distributions can later limit flexibility, the strategy may offer only temporary control. Financial advisers and retirees with smaller balances may be affected differently, since they often lack Roth savings or room to manage provisional income.