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

Reaching age 65 doesn’t automatically change how the IRS taxes your 401(k) withdrawals. Instead, it taxes distributions from a traditional 401(k) as ordinary income, just like wages or Social Security benefits. Your tax rate depends on your total taxable income and filing status in the year you make the withdrawal, not your age. That means you could pay anywhere from 10% to 37% in federal taxes, depending on your income level, plus any applicable state taxes. Strategically managing withdrawals, especially when combined with other income sources like Social Security or pensions, can help reduce your overall tax liability. 

A financial advisor can help you map out when and how to take withdrawals, how different income sources interact and how those choices affect your tax picture.

How 401(k) Withdrawals Are Taxed After 65

Because the IRS treats 401(k) withdrawals as ordinary income, your tax rate is based on your total taxable income for the year. Here are three things to keep in mind: 

• Traditional 401(k): Withdrawals from a traditional 401(k) are subject to federal income tax, and potentially state income tax, as well.
• Roth 401(k): If your Roth 401(k) has met the five-year holding requirement and you are at least 59½, qualified withdrawals are tax-free.
• Only taxable withdrawals matter: The IRS taxes you based on the amount you withdraw, not the entire account balance. Unused funds remain tax-deferred.

For example, that means if you take $30,000 from a 401(k) in retirement, you would add $30,000 to your taxable income. And that income would be taxed according to your marginal tax bracket for that year.

IRS Tax Brackets and 401(k) Withdrawals

This is where it’s important to know which tax bracket you would fall into. The IRS publishes income tax brackets annually, and your withdrawals stack on top of any other taxable income.

Here are the 2025 IRS tax brackets for individuals and married couples filing jointly:

You should also note:

• Withdrawals from a 401(k) are stacked on top of Social Security, pension income, dividends and other earnings.
• A withdrawal could push you into a higher marginal tax bracket, even if temporarily.
• Filing status matters. A married couple filing jointly may have more flexibility to stay in lower brackets than a single filer.

Tax Strategies for Managing Withdrawals After 65

After age 65, planning around your withdrawals can make a major difference when it comes to the taxes you pay. Here are some key strategies to consider:

• Time withdrawals in low-income years: If you delay Social Security or have minimal income for a few years after retirement, consider making larger withdrawals from your 401(k) to take advantage of lower brackets.
• Spread large withdrawals across multiple years: If you need $100,000 for a large purchase, withdrawing it all in one year could bump you into a higher bracket. Instead, consider splitting it up between two or more years if possible.
• Use Roth conversions: Before required minimum distributions (RMDs) begin at 73, you could consider converting portions of your traditional 401(k) to a Roth 401(k) or Roth IRA. While you’ll pay taxes in the year of the conversion, future withdrawals will be tax-free if qualified.
• Compare Roth vs. Traditional 401(k): Traditional 401(k) contributions are pre-tax, but withdrawals are taxable. Roth 401(k)s use after-tax dollars, but offer tax-free withdrawals. A blended strategy may work best, especially when managing future tax exposure.
• Watch for Medicare IRMAA thresholds: Higher income can trigger surcharges on Medicare Part B and D. If your 401(k) withdrawals push you above $106,000 (single) or $212,000 (married), your Medicare premiums could increase ¹ .

Coordinating 401(k) Withdrawals With Social Security

It’s also a good idea to consider whether your withdrawals could affect the taxation of your Social Security benefits. While Social Security itself may not be fully taxable, a portion of it can become taxable depending on your combined income, which includes 401(k) withdrawals. If your combined income exceeds $34,000 for single filers or $44,000 for married couples filing jointly, up to 85% of your Social Security benefits may be taxable.

Combined income is calculated by adding your adjusted gross income, non-taxable interest and half of your Social Security benefits. Since 401(k) distributions increase your adjusted gross income, they can tip the scales and cause more of your Social Security income to be taxed.

To reduce this burden, one strategy is to delay claiming Social Security until age 67 or even 70, while using 401(k) funds to bridge the gap. This can reduce the portion of benefits that become taxable once you do begin claiming. 

Another approach is to stagger your 401(k) withdrawals over multiple years, especially before you begin collecting Social Security. This can help minimize spikes in taxable income and potentially keep more of your Social Security benefits shielded from taxation.

How State Taxes Affect 401(k) Withdrawals

Federal income tax isn’t the only consideration you’ll have to make; state taxes can affect how much of your withdrawal you actually keep. 

Some states, like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, have no income tax at all, meaning 401(k) withdrawals are not subject to state taxes if you live there. Others, including Illinois, Mississippi and Pennsylvania, specifically exempt 401(k) withdrawals and other retirement income such as IRA distributions or pension payments, regardless of your income level.

Several states offer partial exemptions or tax credits that reduce the tax burden for retirees who meet specific age or income requirements. For example, Georgia and New York allow certain deductions on retirement income for residents over a certain age. On the other hand, states like California and Nebraska fully tax 401(k) withdrawals as ordinary income, with no special exemptions for retirees.

Bottom Line

There’s no automatic change regarding your tax rate at age 65. Your 401(k) withdrawals are still taxed as ordinary income based on your total income and tax bracket. And when it comes to managing your withdrawals and working to minimize taxes, there are several strategies for you to consider, from timing withdrawals and managing Medicare premiums, to coordinating with Social Security and choosing between traditional and Roth accounts.

Retirement Planning Tips

• A financial advisor can help you evaluate your full retirement picture and model different withdrawal strategies. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

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