7 Withdrawal Mistakes That Cost High-Earner Retirees the Most
You did the hard part. You saved aggressively, maxed out contributions, and built a portfolio well into seven figures. But here’s the part nobody warned you about: how you pull money out can matter just as much as how you put it in.
For retirees with $1.5 million or more spread across traditional IRAs, Roth accounts, and taxable brokerage accounts, the withdrawal decisions are genuinely different than they are for someone living mostly on Social Security. Taxes, Medicare premiums, and required distributions compound on each other in ways your brokerage app’s pie chart doesn’t show you. A single year of careless withdrawals can trigger a chain reaction that costs tens of thousands of dollars.
These are the seven mistakes we see most often, and each one comes with a specific threshold, dollar figure, or deadline you can actually plan around.
High-earner retirees lose the most money not from poor investments, but from poorly timed and poorly sequenced withdrawals. The conventional “taxable first, tax-deferred second, Roth last” order often backfires when you’re managing IRMAA thresholds, Social Security taxation triggers, and RMDs simultaneously. The fix isn’t a single rule. It’s a year-by-year plan that coordinates every withdrawal across every account against real tax and Medicare math.
1
Following the “Taxable First” Rule Without Doing the Math
You’ve probably heard the standard advice: draw from taxable accounts first, let tax-deferred accounts keep growing, and save your Roth for last. It sounds logical. For a retiree with a moderate nest egg, it often works. But for someone with $1.5 million or more concentrated in traditional IRAs, it sets up a trap.
The problem is RMDs. Under current rules, required minimum distributions start at age 73 for those born between 1951 and 1959 (age 75 for those born in 1960 or later). If you’ve spent your 60s drawing down taxable accounts while your traditional IRA continues growing, you’ll face larger forced withdrawals at 73 that stack on top of Social Security and push you into higher tax brackets. A $2 million traditional IRA at age 73 generates an RMD of roughly $75,000, which lands squarely in the 22% or 24% bracket for most married filers.
A dynamic strategy that fills lower tax brackets with IRA withdrawals in your 60s before RMDs begin, while leaving taxable and Roth accounts intact, can reduce your lifetime tax bill by six figures.
Sources: IRS.gov, RMD Rules; Tax Foundation, 2026 Tax Brackets
2
Roth Conversions That Trigger IRMAA Two Years Later
Roth conversions are one of the most powerful tools in a high earner’s retirement playbook. Converting traditional IRA dollars to Roth means paying income tax now in exchange for tax-free growth and withdrawals later, with no RMDs during your lifetime. The strategy makes particular sense in years when your income dips, like the gap between retiring and starting Social Security.
Here’s what catches people: Medicare’s IRMAA surcharge is based on your tax return from two years prior. A large Roth conversion in 2024 shows up on your 2026 Medicare bill. In 2026, the first IRMAA threshold kicks in at $218,000 for married couples filing jointly. Cross it by even a dollar, and you’ll pay an extra $1,052 per person per year in combined Part B and Part D surcharges. At the top tier, the maximum surcharge reaches $6,936 per person annually.
The conversion itself might still be worth it. But you need to model the IRMAA hit before you decide how much to convert, not after.
Before executing a Roth conversion, calculate your projected MAGI for the conversion year and check it against the IRMAA brackets that will apply two years later. Even splitting a large conversion across two or three years can keep you below a threshold.
Sources: Kiplinger, 2026 IRMAA Brackets; MedicareResources.org
3
Ignoring How RMDs Push Social Security Into 85% Taxation
Most retirees know Social Security benefits can be taxed. Fewer realize how easy it is to cross into the highest taxation tier, especially once required minimum distributions start hitting.
The IRS uses a formula called “combined income” to determine how much of your benefit is taxable: your adjusted gross income, plus any tax-exempt interest (yes, even municipal bonds), plus half your Social Security benefit. For married couples filing jointly, up to 85% of benefits become taxable once combined income exceeds $44,000. For single filers, that threshold is just $34,000.
Those thresholds have not been adjusted for inflation since 1984. That means they’re absurdly easy to exceed. A retiree couple receiving $36,000 in Social Security with a $60,000 RMD blows past the $44,000 mark before they’ve touched their brokerage account. The RMD doesn’t just get taxed on its own; it drags a bigger share of Social Security into taxable territory too.
Sources: IRS.gov, Social Security Taxation; Wealthvieu, Social Security Tax Guide 2026
The Social Security taxation thresholds haven’t moved since 1984. Your benefit keeps rising with inflation. The threshold stays fixed. Every year, a larger share of your benefit becomes taxable without Congress doing a thing.
4
Stacking Capital Gains on Top of Another Large Taxable Event
Selling appreciated stock in a taxable brokerage account is a common, reasonable way to fund retirement spending. The problem isn’t the sale. It’s the timing.
In 2026, long-term capital gains are taxed at 0%, 15%, or 20% depending on your taxable income. Married couples filing jointly stay in the 0% bracket up to $96,700 in taxable income. The 20% rate kicks in above $600,050. On top of that, filers with modified AGI above $250,000 (married filing jointly) owe the 3.8% Net Investment Income Tax, bringing the effective top rate to 23.8%.
Now imagine harvesting $100,000 in long-term gains in the same year you sell a rental property, exercise stock options from a former employer, or take a large IRA distribution. Each event is fine in isolation. Together, they can push your capital gains from the 15% rate into the 20% rate and trigger the NIIT, turning what could have been a $15,000 tax bill into a $23,800 one on the same $100,000 in gains.
Bunching multiple large taxable events into a single calendar year. The difference between the 15% and 23.8% effective capital gains rate is real money on six-figure gains.
Sources: TS CPA, 2026 Capital Gains Rates; USTax Tools, 2026 Capital Gains Thresholds
5
Deferring Your First RMD and Getting Hit With Two in One Year
The IRS gives you a small grace period on your very first required minimum distribution. If you turn 73 in 2026, you can delay that first RMD until April 1, 2027. Sounds generous. But there’s a catch: your second RMD for 2027 is still due by December 31, 2027. That means two full RMDs land in the same tax year.
For a retiree with a $1.8 million traditional IRA, each RMD might be roughly $68,000. Taking both in 2027 means adding approximately $136,000 to your taxable income in a single year instead of spreading it across two. That can bump you from the 22% bracket into the 32% bracket, trigger IRMAA surcharges in 2029, and push Social Security benefits into 85% taxation all at once.
The April 1 option exists for a reason, and it works for some people. But for high earners, taking the first RMD by December 31 of the year you turn 73 almost always results in a lower total tax bill.
Run the numbers on both scenarios: taking the first RMD in the year you turn 73 versus deferring to April 1 and doubling up. For most high earners, the double-RMD year is the more expensive option.
Sources: IRS.gov, RMD Rules; Schneider Downs, RMD Rules for 2026
6
Skipping QCDs After OBBBA Changed Charitable Deduction Rules
If you’re 70½ or older and make charitable gifts, qualified charitable distributions are one of the most tax-efficient moves available. A QCD lets you transfer money directly from your traditional IRA to a qualifying charity. It counts toward your RMD, but the distribution is excluded from your taxable income entirely. In 2026, the annual QCD limit is $111,000 per person, or $222,000 for married couples.
QCDs became even more valuable after the One Big Beautiful Bill Act (OBBBA), signed in July 2025. Under OBBBA, itemized charitable deductions now face a 0.5% AGI floor, and the deduction benefit is reduced by 2% for taxpayers in the top 37% bracket. QCDs bypass both of those limits because they’re an income exclusion, not a deduction. They work whether you itemize or take the standard deduction.
For a retiree who gives $30,000 a year to charity and has a $70,000 RMD, directing that $30,000 as a QCD reduces taxable income by the full amount, lowers the AGI used to calculate Social Security taxation, and can keep you below an IRMAA threshold.
If you’re charitably inclined and over 70½, make the QCD your first distribution of the year. The IRS treats the earliest IRA withdrawals as satisfying the RMD, so timing matters.
Sources: Fidelity, QCD Overview; Schwab, Reducing RMDs With QCDs; Northern Trust, QCDs Under OBBBA
7
Treating Each Account Like a Separate Retirement
This is the mistake that ties all the others together. Most people manage their traditional IRA, Roth IRA, and taxable brokerage account as if they were three separate retirements, each with its own withdrawal logic. They might follow one advisor’s guidance on the IRA, use a different brokerage platform for their taxable account, and treat Roth dollars as untouchable until “later.”
But the tax code doesn’t see your accounts in silos. Every dollar you withdraw from any account feeds into the same AGI calculation, which determines your marginal tax rate, your IRMAA tier, how much of your Social Security gets taxed, and whether you owe the 3.8% NIIT. A Roth withdrawal doesn’t count toward AGI. A taxable account sale triggers capital gains. An IRA distribution is ordinary income. The interplay between these is where six-figure mistakes happen.
This is where it gets personal. The right mix of withdrawals depends on your specific tax bracket, your projected RMDs, your Medicare enrollment year, your charitable giving, and whether you’re in a year with unusually high or low income. There is no formula that works for everyone. There’s only the math for your situation, run year by year.
Your retirement income plan should look at all accounts as a single, coordinated system. Every withdrawal decision should be made with its effect on AGI, Medicare premiums, and Social Security taxation in mind.
Common Questions
What is the best order to withdraw from retirement accounts?
The conventional wisdom says taxable accounts first, then tax-deferred (traditional IRA, 401(k)), then Roth. But for high earners with $1.5 million or more across multiple account types, this order often backfires. A dynamic approach that manages your taxable income year by year, filling lower tax brackets with IRA withdrawals while preserving Roth assets, typically saves far more over a 25-to-30-year retirement.
What income triggers IRMAA Medicare surcharges in 2026?
In 2026, IRMAA surcharges begin when your modified adjusted gross income exceeds $109,000 for single filers or $218,000 for married couples filing jointly. These surcharges are based on your 2024 tax return, creating a two-year lag that catches many retirees off guard. Crossing the first threshold by even $1 adds roughly $1,052 per year in additional Medicare premiums per person.
How much of Social Security is taxable for high earners?
Up to 85% of your Social Security benefits become taxable when your combined income (adjusted gross income plus nontaxable interest plus half your Social Security benefit) exceeds $34,000 for single filers or $44,000 for married couples filing jointly. These thresholds have not changed since 1984, which means most retirees with any significant income beyond Social Security will have a large portion of their benefits taxed.
What is the RMD penalty in 2026?
If you miss a required minimum distribution deadline in 2026, the IRS imposes a 25% excise tax on the amount you should have withdrawn. Under SECURE 2.0, this penalty drops to 10% if you correct the error within two years. RMDs begin at age 73 for individuals born between 1951 and 1959, and at age 75 for those born in 1960 or later.
What is the QCD limit for 2026?
For 2026, the qualified charitable distribution limit is $111,000 per individual, or $222,000 for married couples filing jointly where both spouses are 70½ or older. QCDs satisfy your RMD while keeping the distributed amount out of your taxable income entirely. Under OBBBA’s new charitable deduction limits, QCDs have become even more valuable because they bypass both the new 0.5% AGI floor and the 35% cap on deductions for top-bracket earners.
Rules of thumb only get you so far. When you’re managing seven-figure accounts across multiple tax treatments, the stakes are too high for generic advice. If you’d like to talk through how any of this fits your specific situation, the team at Madison Partners is happy to have that conversation.
This content is for educational purposes only and should not be considered financial, tax, legal, or investment advice. Individual circumstances vary, and readers should consult with a qualified financial advisor, tax professional, or attorney before making decisions based on this information. Madison Partners does not guarantee the accuracy of third-party data cited herein.
