Most Retirees Drawing 4% Owe No Federal Tax at All
A couple over 65 can withdraw about $31,600 a year alongside their benefits before the first dollar of federal income tax. That is a portfolio near $790,000.
Far less than the industry that sells tax-planning products suggests. A married couple where both are over 65 gets $47,500 of deductions in 2026 before anything is taxed, and a large part of a Social Security benefit is not taxable income in the first place.
Put those together and the couple in the example below, with $48,000 of benefits, can draw about $31,600 a year from a traditional IRA and owe nothing federally. On a $1,000,000 portfolio drawing 4%, the bill is $1,550, which is 1.8% of their total income. Draw from a Roth instead and it is zero.
The tax risk in retirement is real, but it is not the ordinary withdrawal. It is what happens when one spouse dies, when required distributions force out more than you want to spend, and when a single dollar crosses an IRMAA threshold.
The deduction stack nobody mentions
Most retirement tax commentary starts at the brackets. The brackets almost never bite, because the deductions get there first, and for someone over 65 there are three of them stacked on top of each other.
- Standard deduction, married filing jointly$32,200
- Age 65 addition, $1,650 each$3,300
- Senior deduction, $6,000 each$12,000
- Before any income is taxed$47,500
Two things about that senior deduction are worth knowing. It only exists for tax years 2025 through 2028, so it is scheduled to disappear and these figures get worse when it does. And it phases out at 6% of income above $150,000 for a couple, so it is a deduction for ordinary retirees rather than wealthy ones.
On top of the deductions, Social Security is taxed on a separate and gentler schedule. Below $32,000 of provisional income a couple pays tax on none of it. The details are in how Social Security gets taxed, and the short version is that a benefit is not simply income.
What a 4% withdrawal actually costs
A married couple, both over 65, with $48,000 a year of Social Security between them, withdrawing 4% of their portfolio. Federal income tax only, 2026 figures. The three tax columns are the same withdrawal taken from three different kinds of account.
| Portfolio | 4% draw | From a Roth | From a traditional IRA | From a brokerage | Spendable, traditional |
|---|---|---|---|---|---|
| $250,000 | $10,000 | $0 | $0 | $0 | $58,000 |
| $500,000 | $20,000 | $0 | $0 | $0 | $68,000 |
| $750,000 | $30,000 | $0 | $0 | $0 | $78,000 |
| $1,000,000 | $40,000 | $0 | $1,550 | $0 | $86,450 |
| $1,500,000 | $60,000 | $0 | $5,804 | $0 | $102,196 |
| $2,000,000 | $80,000 | $0 | $8,300 | $0 | $119,700 |
The brokerage column assumes half the withdrawal is the original investment coming back, which is not income at all, and half is long-term gain. At these levels the gain sits inside the 0% capital-gains band, which for a couple runs up to $98,900 of taxable income. That is why the column is zeros.
Note what the traditional column does above a million dollars. It is not that the tax becomes large. At $2,000,000 the couple draws $80,000, has $128,000 of total income, and pays $8,300, which is 6.5% of everything coming in. That is a lower rate than most people paid on their salary.
Where the money comes from matters more than how much
Look across a single row rather than down a column. At $1,000,000, the same $40,000 withdrawal costs $1,550 out of a traditional IRA and nothing out of a Roth.
The reason is not only that Roth withdrawals are untaxed. It is that they never enter adjusted gross income, so they never count toward provisional income either, which is what decides how much of the Social Security benefit is taxed. A traditional withdrawal can raise the bill twice: once on itself, and once by dragging part of the benefit into tax behind it.
What actually creates a tax bill
Three things, and none of them is the ordinary withdrawal.
One spouse dies
This is the large one and it is badly under-discussed. The couple at $1,000,000 above pays $1,550. A survivor with the same portfolio, drawing the same $40,000, keeping a reduced $28,000 benefit, pays $4,234. Less income, almost three times the tax, because one standard deduction, one age-65 addition and one senior deduction all disappear at once. The arithmetic is laid out in the widow’s penalty.
Required minimum distributions
Up to this point the withdrawal was a choice. From your mid-seventies it stops being one, and the required amount can exceed what you actually want to spend, which pushes income into brackets your spending never would have. See how RMDs are calculated.
An IRMAA threshold
Medicare premiums step up at fixed income thresholds, and they are cliffs rather than slopes. One dollar over raises the premium for a full year. A Roth conversion or a large realised gain can trigger it two years later, since the surcharge works off a return from two years back.
What these figures leave out
They are federal only. State income tax varies enormously: some states levy none, some exempt Social Security and others tax it, and several exempt part of pension or retirement account income. A state bill can be the whole difference between owing nothing and owing something.
They assume both spouses are over 65, which is what unlocks the doubled age additions and the full senior deduction. They assume the standard deduction rather than itemising, which is right for most retirees but not all. And the senior deduction expires after 2028 under current law, so the comfortable figures above are partly a feature of this particular window.
The direction of the finding is robust. The exact dollars are not, and they will move every year.
Questions people ask
Do you pay federal income tax on retirement withdrawals?
Often none at all. A married couple both over 65 has $47,500 of deductions in 2026: a $32,200 standard deduction, $1,650 each for being 65 or older, and the $12,000 senior deduction. With $48,000 of Social Security benefits, that couple can withdraw about $31,600 a year from a traditional IRA before owing a single dollar of federal income tax, which is a portfolio of roughly $790,000 at a 4% withdrawal rate.
How much tax would I pay on a $1 million portfolio in retirement?
On a 4% withdrawal of $40,000 alongside $48,000 of Social Security, a couple over 65 drawing entirely from a traditional IRA owes about $1,550 in federal income tax. That is roughly 1.8% of their $88,000 of total income. Drawing instead from a Roth, they owe nothing, because Roth withdrawals are not income and so do not make any of the Social Security benefit taxable either.
Are Roth withdrawals really tax-free in retirement?
Yes, for a qualified withdrawal, and the benefit goes further than the withdrawal itself. Because a Roth withdrawal never enters adjusted gross income, it does not count toward provisional income, which is the figure that decides how much of a Social Security benefit is taxed. A traditional withdrawal can therefore raise a tax bill twice: once on itself and once by dragging the benefit into tax.
What actually creates a large tax bill in retirement?
Three things, and none of them is the ordinary 4% withdrawal. The death of a spouse, which moves the survivor onto single brackets and halves the deductions. Required minimum distributions, which force withdrawals larger than the spending they fund. And crossing an IRMAA threshold, which raises Medicare premiums for a full year on the strength of a single dollar.
Does this include state income tax?
No. Every figure here is federal only. State treatment varies widely: some states have no income tax at all, some exempt Social Security and some do not, and several exempt a portion of pension or retirement account income. A state bill can be the difference between owing nothing and owing something.
Where these figures come from
Every dollar amount and age threshold on this page traces to one of these. Amounts set by statute change with the tax year, so each one is stated here with the year it applies to. If you find a figure on this page that disagrees with the source, tell us and it goes in the corrections log.
- IRS, Revenue Procedure 2025-32, inflation-adjusted amounts for 2026
- IRS, 2026 filing season updates and resources for seniors
- IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- IRS Publication 554, Tax Guide for Seniors
Links last checked 25 October 2026.
Retire BFF is an independent publisher, not a registered investment adviser, tax adviser, or financial planner. Everything here is general information about how the rules work, not advice about your situation. Figures are 2026 federal amounts applied to an illustrative household, and your own result depends on your full return, your state, and your filing status. Confirm current figures at irs.gov and talk to a tax professional before acting.