I’m 67 With $870k in a 401(k), $120k in an IRA and a $2,200 Social Security Check. What’s My Retirement Budget?

Deciding how much to withdraw from your retirement accounts requires finding a balance between enjoying life and making your money last. Taking too little leaves you with unused savings, while taking too much means you risk running out of money later. Taxes also affect how much you can actually spend. To help you create a retirement budget, imagine a 67-year-old with $870,000 in a 401(k), $120,000 in an IRA and $26,400 annually from Social Security. Here’s what their withdrawal plan could look like.

A financial advisor can help you create a withdrawal strategy that balances your lifestyle needs, tax impacts and long-term retirement goals.

Know Your Taxes

A 401(k) and traditional IRA are both retirement accounts funded with pre-tax dollars. ¹ Contributions are deducted from your taxable income. This allows you to grow savings faster because the money enters the account before taxes.

In retirement, however, all withdrawals are taxed as ordinary income. ² This includes both your contributions and investment earnings.

This is different from a Roth IRA, which is funded with after-tax dollars. ³ You do not receive an upfront tax deduction for contributions, as the benefit comes later. Withdrawals in retirement are tax-free, including both contributions and earnings.

Assuming that you have a traditional IRA in this example, every withdrawal in retirement is considered taxable income. ⁴ This is a pre-tax account, so withdrawals are taxed at income tax rates, not the lower capital gains rates that apply to taxable investment accounts.

You should also plan for Social Security taxes. Depending on your total income, up to 85% of your benefits may be taxable. This can significantly increase your annual tax bill when combined with withdrawals from pre-tax retirement accounts.

Anticipate RMDs

Required minimum distributions (RMDs) begin at age 73 for anyone with pre-tax retirement accounts, such as 401(k)s and IRAs. ⁵

You must figure out the RMD for each IRA individually. However, you can take the total amount due from a single IRA or divide it among multiple IRAs. For 401(k)s and other employer plans, you must take the RMD from each account individually.

You can delay your first RMD until April 1 of the year after you turn 73. However, you must then take two RMDs in that year; the deferred one, plus the regular one for that year. ⁶ Doubling up distributions can push you into a higher tax bracket. It may also increase the taxable share of your Social Security or affect Medicare premiums.

Your RMD amount is based on the account balance as of December 31 of the prior year and a divisor from the IRS Uniform Lifetime Table, which assigns factors according to age. At age 73, the divisor is 26.5.⁷

For example, if you still have $870,000 in your 401(k) at age 73, you will divide that balance by 26.5. The result is $32,830, which is the minimum you must withdraw from the account that year. You would then repeat the same calculation for your IRA using its own balance at year-end.

Use SmartAsset’s RMD Calculator to estimate how much you need to withdraw from your retirement accounts once you reach RMD age.

The RMD rule taxes withdrawals from pre-tax retirement accounts.

This doesn’t have much impact on many retirees, since their regular withdrawals already exceed the required minimum. The rule matters more if you hold multiple accounts. This is because you cannot leave one untouched indefinitely while only drawing from another.

Between ages 67 and 73, you can keep your savings in place and choose how to take withdrawals. For example, you might spend down an IRA first before turning to a 401(k). However, you must begin taking minimum withdrawals at 73 from every pre-tax account still holding assets.

Create a Withdrawal Strategy

Creating a withdrawal strategy means aligning your spending needs with sustainable, post-tax account withdrawals.

Social Security benefits may be taxable up to 85%, depending on your other income. That means retirement account withdrawals can affect both your taxable income and Social Security taxes.

For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Individuals age 65 or older also get an additional $6,000 deduction, or $12,000 for joint filers, under the One Big Beautiful Bill Act. This provision applies from 2025 through 2028 ⁸ and phases out for income above $75,000 for single filers and $150,000 for married couples. ⁹

To demonstrate a withdrawal strategy, consider a household with $870,000 in a 401(k), $120,000 in an IRA and $26,400 annually in Social Security.

5% Withdrawal Rate

With a 5% withdrawal rate, the accounts generate $49,500. Adding Social Security brings total income to $75,900.

• At that level, about $21,895 of the Social Security benefit is taxable, resulting in an adjusted gross income of $71,395.
• Subtract the $32,200 2026 standard deduction for married couples filing jointly, plus the $6,000 age 65+ individual add-on, for $44,200 total. Taxable income then comes to $39,195.
• Federal income tax on that amount is an estimated $4,703, leaving after-tax income of roughly $66,692.

8% Withdrawal Rate

If the withdrawal rate goes up to 8%, the accounts produce $79,200. This increases total income to $105,600 after including Social Security.

• At that level, about $22,440 of the Social Security benefit is taxable, which brings adjusted gross income to $105,600.
• Subtract the standard deduction of $32,200 for married couples filing jointly, plus $6,000 per spouse age 65+ ($44,200 total). Taxable income is then $61,400.
• Federal taxes on that amount would be an estimated $7,368, leaving just under $99,214 after taxes.

Compared side-by-side, the 5% withdrawal strategy delivers an after-tax income of about $67,000. Meanwhile, the 8% withdrawal strategy provides closer to $100,000. The larger withdrawal results in higher spending power in the short term but carries more risk of depleting savings sooner.

Research generally suggests that long-term sustainable withdrawal rates fall between 3.5% and 4% for a 30-year retirement horizon. ¹⁰ The right balance will depend on portfolio returns, spending needs and tax treatment. However, this assumes a sustainable after-tax income of $66,000 to $99,000 annually, depending on the withdrawal rate and deductions.

Financial Advisor Services to Create a Retirement Budget

A retirement financial advisor can help in several ways.

Creating a Budget

A financial advisor can start by mapping out all of your expected retirement income sources.

These can include:

• Social Security
• Pensions
• Retirement account withdrawals
• Annuities
• Part-time work

Knowing exactly how much money you receive monthly will give you a realistic starting point when building a retirement budget. Without this step, most people either overestimate or underestimate what they will have to spend.

Organizing Expenses

An advisor can help you categorize your expenses into fixed costs, such as housing, insurance and utilities, and variable costs, such as travel and dining. They can also identify expenses that may change significantly in retirement. These can include healthcare costs that tend to rise over time and commuting expenses that no longer apply.

This breakdown of retirement spending will give you a clearer picture of your actual spending needs year by year.

Tax Planning

Tax planning is a critical part of any retirement budget. A financial advisor can show you how different income sources are taxed, so you know what you actually keep. Social Security may be partially taxable depending on your total income. Traditional 401(k) withdrawals are subject to ordinary income tax, while Roth withdrawals are tax-free. An advisor can sequence your withdrawals across account types to reduce your overall tax burden and stretch your savings further.

Budget Stress-Testing

An advisor can also stress-test your budget against potential disruptions. These can include a market downturn early in retirement, unexpected medical expenses or the loss of a spouse and, subsequently, one Social Security check. Running these scenarios ahead of time helps you build in a margin. This way, you do not have to make major changes under pressure.

Regular Reviews

Your spending needs will shift over the course of a retirement that could last 25 to 30 years. An advisor can schedule regular reviews to compare your actual spending against your plan. They can then rebalance your investments and adjust your withdrawal strategy as circumstances and markets change.

Bottom Line

Your retirement budget will depend on several factors, but two important ones are taxes and required minimum withdrawals. As you make your retirement budget, be sure to account not only for your withdrawals but also for how much of those withdrawals you actually keep.

Retirement Planning Tips

• If you need more of a hands-on approach to retirement, a financial advisor can help you build a comprehensive plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Don’t forget that your state (and maybe even city) can levy taxes too. If you want to maximize your retirement withdrawals, looking for states that don’t tax those portfolios might be a smart strategy. 

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