Most “retirement planning” advice is either too vague to act on (“save more!”) or too specific to your neighbor’s situation. This guide takes a different approach: it walks through the five decisions that almost every U.S. retiree faces, in the order you’ll face them, and shows what each one actually involves — the contribution limits, the deadlines, the math, and the trade-offs.

This is the planning side of retirement. For the income side, see our companion guides on Social Security, SSI, SSDI, and pensions. For lifestyle and budget targets, see How Much Pension Do You Really Need?

In This Guide

• 401(k) and IRA Strategy
• Required Minimum Distributions
• Withdrawal Sequencing
• Medicare Enrollment
• Retirement-Income Taxes
• Frequently Asked Questions

401(k) and IRA Strategy

For most private-sector workers, the 401(k) and the IRA are the two pillars of retirement savings outside Social Security. They look similar — tax-advantaged accounts that hold mutual funds and ETFs — but they have different limits, different rules, and very different roles in a complete plan.

2026 contribution limits

Figures are approximate 2026 estimates based on 2025 IRS limits and projected cost-of-living adjustments. Verify current numbers at irs.gov before relying on them for tax planning.

The order of priority that works for most people

1. Contribute enough to your 401(k) to capture the full employer match. A typical 50% match on the first 6% of pay is a 50% guaranteed return on day one. Skipping it is the most expensive thing you can do with retirement money.
2. Build an emergency fund of 3–6 months of expenses in a high-yield savings account. Without it, you’ll end up tapping retirement accounts at the wrong moment.
3. Pay off high-interest debt (credit cards, personal loans). A 22% APR balance is a guaranteed 22% loss; almost no investment beats that.
4. Max out a Roth IRA if you qualify (under the income phase-outs) and are in a low-to-moderate tax bracket. Roth contributions grow tax-free and have no RMDs during your lifetime.
5. Return to the 401(k) and increase contributions until you hit the annual limit, especially in your peak earning years.
6. If your 401(k) offers it, use the after-tax “Mega Backdoor Roth” contribution to shovel additional money into Roth space.
7. Consider an HSA if you have a high-deductible health plan. HSAs are the most tax-advantaged account in the U.S. tax code: deductible going in, tax-free growth, tax-free withdrawals for qualified medical expenses.

Traditional vs Roth: the simplified version

• Traditional contributions are deducted from your taxes today; you pay tax when you withdraw in retirement. Best when your current tax bracket is higher than your expected retirement bracket.
• Roth contributions are made with after-tax money; qualified withdrawals are tax-free. Best when your current bracket is lower than your expected retirement bracket, when you want tax-free income to manage Medicare premiums and Social Security taxation in retirement, or when you want to leave heirs an income-tax-free inheritance.
• Most people benefit from both. Splitting contributions gives you “tax flexibility” in retirement: you can choose which account to draw from each year based on what tax bracket you’re in.

Roth conversions: the planning tool retirees underuse

Between the year you stop working and the year you start RMDs (typically 65 to 73), many retirees fall into an artificially low tax bracket. Their wages have stopped, but Social Security and large IRA distributions haven’t started. This is the prime window for Roth conversions: moving money from traditional IRAs into Roth IRAs, paying tax now at a low rate, and reducing the future RMDs that would push you back into a higher bracket. Done well, multi-year Roth conversion ladders can save tens of thousands in lifetime taxes.

Required Minimum Distributions

Once you reach a certain age, the IRS requires you to start withdrawing money from most tax-deferred retirement accounts every year — not because you need the money, but because the government wants to start collecting the deferred tax. These mandatory withdrawals are called Required Minimum Distributions, or RMDs.

When RMDs start

• Age 73 — for anyone reaching 72 in 2023 or later (born 1951 through 1959).
• Age 75 — for anyone born in 1960 or later, starting in 2033.
• Your first RMD can be deferred to April 1 of the year after you turn 73, but every subsequent RMD must be taken by December 31. Deferring your first RMD means taking two RMDs in one year — sometimes a tax mistake.

Which accounts have RMDs

• Yes: Traditional IRA, SEP-IRA, SIMPLE IRA, traditional 401(k), 403(b), 457(b), federal Thrift Savings Plan.
• No: Roth IRA (during original owner’s lifetime). Roth 401(k) RMDs were eliminated starting in 2024 under SECURE 2.0.
• Special case: If you are still working past 73 and your employer’s 401(k) plan allows it, you can defer RMDs from that specific 401(k) until retirement — but not from any other accounts.

How RMDs are calculated

The RMD formula is simple: account balance on December 31 of the prior year divided by an IRS life-expectancy factor for your age. The IRS publishes the Uniform Lifetime Table; some sample factors:

Example: A 75-year-old with $500,000 across her traditional IRAs must withdraw at least $500,000 / 24.6 = $20,325 by December 31. The amount goes on her tax return as ordinary income.

The penalty for missing an RMD

Under SECURE 2.0, the penalty is a 25% excise tax on the amount you should have withdrawn. The penalty is reduced to 10% if you correct the shortfall within a 2-year correction window and file IRS Form 5329 with the correction. Before SECURE 2.0, the penalty was a flat 50% — one of the harshest penalties in the tax code.

Aggregation rules

• IRAs can be aggregated. Calculate the RMD for each IRA, then withdraw the total from any one of them.
• 403(b)s can be aggregated with each other but not with other plan types.
• 401(k)s cannot be aggregated. Each plan must take its own RMD.

Qualified Charitable Distributions (QCDs)

If you are 70½ or older and charitably inclined, a Qualified Charitable Distribution sends up to about $108,000 directly from your IRA to a 501(c)(3) charity. The QCD counts toward your RMD but is excluded from your taxable income, often resulting in a much better outcome than taking the RMD and then deducting a charitable contribution.

Withdrawal Sequencing

You will likely have at least three different “buckets” of retirement money: taxable (regular brokerage, savings), tax-deferred (traditional IRA, 401(k)), and tax-free (Roth IRA, Roth 401(k), HSA). The order in which you draw from these buckets has an enormous impact on lifetime taxes — often more than market returns.

The traditional sequence

1. Taxable accounts first. Withdrawals are taxed only on the gain (capital gains rates), and using these accounts first keeps tax-deferred growth running longer.
2. Tax-deferred accounts next. RMDs force this anyway starting at 73. Drawing earlier prevents balance balloon and pushes against future tax-rate risk.
3. Roth and tax-free accounts last. Tax-free growth and no RMDs — you want these compounding the longest, both for you and for heirs (Roth IRAs inherited by non-spouses must be drained within 10 years but remain tax-free).

The smarter modern approach: bracket-filling

Drawing strictly from one bucket at a time wastes opportunity. A more sophisticated strategy is to fill the lower tax brackets each year with traditional IRA distributions or Roth conversions, even when you don’t need the money for spending. The result: years of low income aren’t “wasted” at the bottom of your tax life; they actively reduce future RMDs and preserve tax-free Roth dollars for later.

The “tax torpedo” to plan around

For middle-income retirees, an extra $1,000 of IRA withdrawal can cause $850 of additional Social Security to become taxable, creating an effective marginal tax rate of 22.2% even while you’re “officially” in the 12% bracket. Smart withdrawal sequencing avoids stumbling into this zone or, when unavoidable, accelerates withdrawals in years before the trap closes.

Medicare Enrollment

Medicare is the federal health-insurance program for people 65 and older (and certain disabled individuals). Enrollment timing matters because missing the right window can trigger lifetime late-enrollment penalties on your monthly premium.

The four parts of Medicare

• Part A — Hospital insurance. Premium-free for most Americans (you’ve already paid through 40 quarters of Medicare-covered work). Covers inpatient hospital, skilled nursing, and hospice.
• Part B — Medical insurance. Covers doctor visits, outpatient care, preventive services. Standard 2026 premium is approximately $185/month, higher for high earners (IRMAA).
• Part C — Medicare Advantage. Private plans that bundle A, B, and usually D, often with a $0 premium. Use provider networks and may require referrals or prior authorization.
• Part D — Prescription drug coverage. Stand-alone drug plans run by private insurers. Average 2026 premium roughly $35–$50/month.

Enrollment windows

The penalties for missing the window

• Part B late penalty: 10% added to your monthly Part B premium for each full 12-month period you delayed without qualifying coverage. The penalty applies for as long as you have Part B — potentially decades.
• Part D late penalty: 1% of the national base beneficiary premium for each month you went without qualifying drug coverage after turning 65. Applies as long as you have Part D.
• Part A late penalty (only for those who pay a Part A premium): 10% added for twice the number of years you delayed.

IRMAA: high earners pay more

The Income-Related Monthly Adjustment Amount (IRMAA) raises Part B and Part D premiums for retirees with higher modified adjusted gross income. IRMAA uses your MAGI from two years prior — so your 2026 Medicare premium is based on your 2024 tax return. Roth conversions, IRA withdrawals, and capital gains in your early 60s can push you into IRMAA tiers in the years that count for Medicare. Plan accordingly.

Retirement-Income Taxes

Many retirees are surprised that their tax life isn’t simpler in retirement — it’s just different. You stop having wages, but you may have Social Security, pension, IRA, and Roth income, each taxed under its own rules.

How each income source is taxed

How Social Security is taxed

The IRS uses a “combined income” calculation:

• Below $25,000 (single) / $32,000 (married filing jointly): none of your benefits are taxable.
• $25,000–$34,000 / $32,000–$44,000: up to 50% of benefits become taxable.
• Above $34,000 / $44,000: up to 85% of benefits become taxable.

The thresholds have not been indexed for inflation since they were set in the 1980s, so each year more retirees pay tax on their Social Security simply because the income standards haven’t moved.

State income taxes on retirement income

• States with no income tax: Alaska, Florida, Nevada, New Hampshire (no wage tax; some interest/dividend tax phasing out), South Dakota, Tennessee, Texas, Washington, and Wyoming.
• States that don’t tax Social Security: most states. Only a handful still tax Social Security in some way (and several of those have generous deductions or income thresholds).
• States with friendly retiree treatment: states like Pennsylvania exempt most retirement income; Illinois exempts qualified retirement plan withdrawals.
• Always check the rules at the time you retire — states change their treatment of retirement income regularly.

Federal tax brackets to plan around

Federal income-tax brackets for 2026 are estimated as roughly: 10%, 12%, 22%, 24%, 32%, 35%, and 37% (subject to whether the 2017 Tax Cuts and Jobs Act provisions are extended past their original expiration). The 0% long-term capital gains bracket goes up to roughly $48,000 single / $96,000 married for 2026 — an enormous opportunity to harvest gains tax-free if you can manage your taxable income to fall under that line.

Frequently Asked Questions

Should I prioritize my 401(k) or my IRA?

Almost always: 401(k) up to the employer match first (free money), then a Roth IRA if you qualify, then back to the 401(k) until you reach the annual limit. The order is about capturing match dollars and tax-flexibility, not about which account is “better” in isolation.

Can I still contribute to an IRA after I retire?

Only if you (or a spouse, in the case of a spousal IRA) have earned income that year. Social Security, pension income, and investment income do not count. If you do part-time consulting, gig work, or have any W-2 wages, you can contribute up to the annual limit (or your earned income, whichever is less).

Do I have to take an RMD if I’m still working?

Yes from any IRA. From your current employer’s 401(k), you can defer the RMD until you retire if the plan permits and you don’t own 5% or more of the company. RMDs from former employers’ 401(k)s and from any IRA continue regardless of your work status.

Should I take Social Security at 62 to delay tapping retirement accounts?

Usually not. Claiming early reduces your benefit by about 30% for life. For most healthy retirees with sufficient assets, drawing IRA balances down in your 60s while delaying Social Security to 70 produces more lifetime income, smaller RMDs, and fewer Medicare-premium surprises. See our full Social Security 62 vs 67 vs 70 comparison.

What is a backdoor Roth?

A backdoor Roth is a two-step process for high earners who exceed the Roth IRA income limits: contribute to a non-deductible traditional IRA, then convert it to a Roth IRA. Done correctly, it adds Roth space without violating contribution rules. The pro-rata rule on existing pretax IRA balances can complicate it — consult a tax professional before executing.

Can I delay Medicare if I have employer coverage past 65?

Yes, if your employer has 20 or more employees and the coverage qualifies as creditable. You can delay Part B and Part D without penalty and use a Special Enrollment Period when the employer coverage ends. If your employer has fewer than 20 employees, Medicare typically becomes the primary payer at 65 and you should enroll on time to avoid coverage gaps.

Related Guides on SecurityPension.com

• Social Security Benefits Guide
• Social Security 62 vs 67 vs 70
• How Much Pension Do You Really Need?
• Monthly Retirement Income Examples ($1K–$5K)
• Retirement Planning Checklist
• Pension Types Explained
• SSI: Supplemental Security Income
• SSDI: Social Security Disability Insurance

Sources

• Internal Revenue Service, “Retirement Topics — 401(k) and Profit-Sharing Plan Contribution Limits” — irs.gov
• Internal Revenue Service, “Retirement Plan and IRA Required Minimum Distributions FAQs” — irs.gov
• Internal Revenue Service, Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs)”
• Centers for Medicare & Medicaid Services, “Understanding Medicare Enrollment Periods” — medicare.gov
• Social Security Administration, “Income Taxes and Your Social Security Benefit” — ssa.gov
• SECURE 2.0 Act of 2022 — Public Law 117-328, Division T

This guide is general information only, not legal, tax, or financial advice. The dollar figures cited are 2026 estimates based on prior-year limits and projected cost-of-living adjustments; verify current numbers with the IRS, SSA, or a qualified tax professional before relying on them. Page last reviewed: May 6, 2026. Questions or corrections: editorial@securitypension.com.