IRS demands $56,604 yearly from $1.5M 401(k) at age 73

A record 1.06 million Americans now have $1 million or more saved in their 401(k) retirement accounts — and the IRS is about to send them a tax bill of roughly $56,600 a year starting in 2026 for those turning 73, even if they don’t withdraw the money.

The surge in million-dollar 401(k)s reflects a decade of strong markets, consistent contributions and compound growth, pushing many workers closer to the finish line of their retirement savings race. But the milestone comes with a catch: the IRS requires retirees to start taking Required Minimum Distributions (RMDs) from traditional 401(k)s and IRAs once they reach age 73. These withdrawals are taxed as ordinary income — and for high balances, they can push savers into higher tax brackets, increase Medicare premiums, and accelerate tax erosion of their nest eggs. The issue isn’t just about needing cash; it’s about managing a tax time bomb that many savers didn’t plan for during their working years.

The math is brutal. If you turned 73 in 2025 and had exactly $1.5 million in your 401(k) at the end of that year, your first RMD due in 2026 would be $56,604, according to IRS calculations. That’s not a suggestion — it’s a legal obligation. Miss it, and you face a 25% penalty on the undistributed amount. The amount grows as you age: at 75, the same $1.5 million balance would trigger a $61,000 RMD. These withdrawals sit on top of other income like Social Security, which can push total income high enough to trigger IRMAA surcharges on Medicare Part B and D premiums starting at $109,000 for individuals and $218,000 for couples.

Experts warn that many savers with large 401(k)s are underestimating the tax impact and overestimating how long their money will last. The RMD schedule is fixed, but tax laws aren’t — and the 2017 Tax Cuts and Jobs Act, which lowered many tax rates, is set to expire after 2028, potentially pushing future RMDs into even higher brackets. Financial advisors increasingly recommend strategies like Roth conversions, charitable giving through qualified charitable distributions, or purchasing longevity insurance to reduce future RMD drag. Time is running short, especially for those already in or near retirement.