You saved $1.5M in your 401(k) — now the IRS wants $56,603 a year, and that's just the start

You saved $1.5M in your 401(k) — now the IRS wants $56,603 a year, and that's just the start

Vishesh Raisinghani

Sun, August 9, 2026 at 4:00 PM GMT+3 5 min read

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Reaching $1.5 million in your 401(k) plan could feel like touching the finish line of a decades-long marathon. It's obviously a time for celebration.

But there's someone else celebrating with you: the taxman.

With such a large balance in your retirement account, you're potentially at risk of triggering required minimum distributions (RMDs) in your retirement, according to the IRS (1). Simply put, an RMD is the minimum amount you have to withdraw from your 401(k) each year during retirement — and it's fully taxable as ordinary income.

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This could be a problem even if you're several years away from age 73, when RMDs officially kick in, as there's probably not enough time to insulate such a large balance from taxes.

Here's a closer look at why your RMDs and tax liability could be worse than you might think.

401(k) millionaire tax trap

At the end of June 2026, the number of 401(k) accounts with balances of at least $1 million was roughly 1,059,396, according to data from the Empower Personal Dashboard (2).

That's a time club, but if you're lucky enough to be in or near it, your tax planning needs special considerations.

Not only are you subject to RMDs after the age of 73, but the exact amount you need to withdraw changes every year. The IRS uses the Uniform Lifetime Table (3) to determine your RMD every year, and the exact calculation requires your age and account balance on Dec. 31 of the previous year.

So, if you had $1.5 million in 401(k) assets on Dec. 31, 2025, and you were precisely 73 years old at that time, your RMD for 2026 would be $56,603.77, according to the SEC's online calculator (4). And if you were 75 years old at the time, for instance, your RMD would be $60,975.

That's not optional income. It's not "if you need it." The IRS requires it whether you spend it, reinvest it or just watch it land in a taxable brokerage account. And this is income on top of your other sources, such as Social Security, pension income, dividends from a brokerage account or rental income from a property portfolio.

In other words, the RMDs could be enough to bump you and your partner up to a higher tax bracket. And taxes are not the only concern.

Higher total income could also trigger an income-related monthly adjustment amount (IRMAA), which increases your medical costs. For 2026, IRMAA kicks in at anything above $109,000 in annual income for individuals and above $218,000 for couples filing together, according to Medicare.gov (5).

The good news: You can take steps to try to avoid this massive cost, with a little planning in advance. The better news: You don't have to do it alone.

Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here's where their money is actually going

How to rescue your retirement

For those looking to minimize RMDs and their associated tax burden, there are several sophisticated tax moves that can help. Strategies like IRA Roth conversions (6) or qualified charitable distributions (QCDs) (7) can help mitigate the issue.

To be most effective, you'll probably want to deploy these strategies as early as possible and with the right structure. Hiring a professional tax expert or financial advisor several years before you retire could be the savviest money move you can make, especially if you're a millionaire or relatively affluent.

For instance, if you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.

Simply answer a few questions about your savings, retirement timeline and overall investment portfolio. From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.

You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals.

WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.

Bottom line

While having $1.5 million in a 401(k) would probably sound attractive to most Americans, it can trigger RMDs that put you into a higher tax bracket during your retirement. That's why it's always a good idea to plan in advance, especially if you have a larger portfolio, with the help of a tax expert or financial advisor. Once you have the right expert by your side, you can develop a plan that rapidly reduces your RMDs and tax burden in retirement.

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Article Sources

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Internal Revenue Service (), (); Empower (); Investor.gov (); Medicare.gov (); Vanguard (); Fidelity Charitable ()

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.