Most people spend 30 years building their retirement savings. They contribute every year. They watch the balance grow. They do everything right.
And then retirement starts. Somehow, the money does not stretch as far as they expected.
The balance looked fine on paper. But the monthly income feels tighter than it should. The tax bill is bigger than they planned for. Medicare costs more than they budgeted. And nobody warned them about any of it.
This is one of the most common problems in retirement, and it has almost nothing to do with how much someone saved. It has to do with how their income sources work together once the paychecks stop.
The good news: this is fixable. And fixing it could mean thousands of dollars more in your pocket each year. And fixing it does not require saving more money or taking more risk. It requires coordination: understanding how your income sources interact, and making intentional decisions about the order and timing of your withdrawals.
What the Research Shows
Two in three Americans (67%) say they worry more about running out of money than dying, according to Allianz Life’s 2026 Annual Retirement Study. That is up 10 percentage points from 2022.
The worry is real. But the cause is often misdiagnosed. The problem is usually not the balance. It is what happens to the money once it starts coming out.
The Hidden Problem: Your Income Sources Do Not Know About Each Other
Most retirees have income coming from several different places. Social Security. An IRA or 401(k). Maybe a pension. Interest from savings accounts. Perhaps some investment income.
Each source feels like its own thing. Each arrives in a separate account. Each has its own rules.
But the IRS does not see it that way. The IRS adds everything together. The total determines how much tax you pay, how much of your Social Security is taxable, and whether your Medicare premiums go up.
This is the stacking problem. And it catches most retirees completely off guard.
A Simple Example
A retiree needs $10,000 for a home repair. She pulls $10,000 from her traditional IRA. She expects to pay tax on $10,000.
What she does not expect: that $10,000 withdrawal also pushed $8,500 of her Social Security benefit into taxable territory. That was income that had been tax-free before. She did not just pay tax on $10,000. She paid tax on nearly $18,500. The sources stacked against each other, and nobody warned her.
How Social Security Taxation Works, in Plain English
Most people do not know that Social Security benefits can be taxable. And most of those who do know it do not know how much of their benefit can be taxed, or what triggers it.
The IRS uses a number called provisional income to decide this. Here is how to calculate it:
How to Calculate Your Provisional Income
Once you have that number, here is what the IRS does with it:
Your Provisional Income
Single Filers
Married Filing Jointly
Under the first threshold
Under $25,000
Under $32,000
Social Security taxable: 0%
None of your benefit is taxed
None of your benefit is taxed
Between the two thresholds
$25,000 to $34,000
$32,000 to $44,000
Social Security taxable: up to 50%
Up to half your benefit may be taxed
Up to half your benefit may be taxed
Above the upper threshold
Over $34,000
Over $44,000
Social Security taxable: up to 85%
Up to 85% of your benefit may be taxed
Up to 85% of your benefit may be taxed
Source: IRS Publication 915. Thresholds have not been adjusted for inflation since their enactment.
Here is the part that catches people off guard. Those thresholds have not been adjusted for inflation since their enactment in the mid-1980s and early 1990s. The average Social Security benefit is now over $2,000 per month. A couple receiving two average Social Security checks (about $48,000 per year combined) is already close to or above the upper threshold before they take a single dollar from their IRA.
That means for many retirees, the question is not whether their Social Security is taxable. It is how much additional income will cost them, because every dollar of IRA withdrawal or pension income is also making more of their Social Security taxable at the same time.
The Medicare Piece Nobody Mentions
Social Security taxation is not the only place where income stacking costs retirees money. Medicare does the same thing, and the Medicare version has a feature that makes it especially painful.
Medicare charges higher premiums to people whose income exceeds certain levels. These are called income-related monthly adjustment amounts, called IRMAA surcharges. In 2026, the income threshold that triggers the first IRMAA surcharge is $109,000 for single filers and $218,000 for married couples filing jointly. (Source: Centers for Medicare and Medicaid Services, 2026.)
What makes IRMAA painful is that it works like a cliff, not a ramp. One dollar over the threshold triggers the full surcharge for the entire year. A couple whose income is $219,000 pays the same IRMAA surcharge as a couple with income of $250,000, even though their income is barely above the line.
There is another layer most retirees do not know about. Medicare uses your income from two years prior to set your current premiums. So the income decisions you make in 2026 affect your Medicare premiums in 2028, two years from now, when it may be too late to do anything about it.
Hypothetical Scenario:
Richard and Helen are both 67. Their combined income (pension, Social Security, and savings interest) comes to $210,000 per year. They are comfortably below the $218,000 IRMAA threshold and pay standard Medicare Part B premiums of $202.90 per month each.
In 2026, their furnace fails. They pull $12,000 from their traditional IRA to pay for a replacement. Their income for 2026 is now $222,000, which is $4,000 above the IRMAA threshold. Two years later, in 2028, their Medicare premiums increase by $81.20 per person per month, or $162.40 per month for the couple, or about $1,950 more per year. And it stays elevated until their 2026 income no longer applies.
Individual results will vary. This illustration is for educational purposes only and does not represent any specific client situation.
A $12,000 withdrawal to fix a furnace ended up costing thousands more in Medicare premiums. A coordinated plan would have seen that cliff coming and found another way to cover the expense, whether from a savings account, a Roth IRA, or a different timing of the withdrawal.
Three Decisions That May Give You More Income in Retirement
The stacking problem is real. But it is manageable. Here are the three decisions that make the biggest difference for most retirees, in order of impact.
Choose the right account to draw from, based on where your income lands this year
Not all retirement accounts work the same way in the eyes of the IRS. Traditional IRA and 401(k) withdrawals count toward your adjusted gross income, and therefore toward your provisional income. Roth IRA withdrawals do not. They are not included in your adjusted gross income, they do not affect your provisional income, and they do not count toward Medicare thresholds.
This means that if your provisional income is approaching one of the key thresholds, a Roth withdrawal instead of a traditional IRA withdrawal may let you take the same amount of money while keeping more of your Social Security tax-free. Same spending money. Lower tax bill.
The right withdrawal order is not fixed. It changes based on where your income sits relative to the thresholds each year. That is why coordination is an annual exercise, not a one-time setup.
For pre-retirees: Building a Roth IRA alongside your traditional IRA during your working years gives you this flexibility in retirement. Without it, every withdrawal goes through the same taxable channel.
Convert traditional IRA funds to Roth before required minimum distributions begin at age 73 (or age 75 if born in 1960 or later)
Required minimum distributions (RMDs) begin at age 73 under current law for those born between 1951 and 1959, and at age 75 for those born in 1960 or later, per the SECURE 2.0 Act. Starting at that age, the IRS requires you to withdraw a minimum amount from your traditional IRA and 401(k) each year, whether you need the money or not. Those withdrawals are fully taxable and count toward your provisional income.
The window between retirement and age 73 is often the best opportunity to convert some of your traditional IRA funds to a Roth IRA. You pay tax on the converted amount now, potentially at lower rates than you would pay later, when RMDs are stacking on top of Social Security and other income. Qualified Roth withdrawals are generally tax-free under current law, and they do not trigger provisional income in future years.
Once RMDs begin, the mandatory income narrows your options significantly. The conversion window does not close permanently, but it becomes much less useful when mandatory income is already pushing you into higher brackets.
Tax treatment of Roth conversions depends on individual circumstances and your total income picture. Consult a qualified tax professional before converting.
Use qualified charitable distributions if you give to charity and you are over age 70½
A qualified charitable distribution (QCD) allows people age 70½ and older to transfer money directly from their IRA to a qualified charity. The transfer counts toward your required minimum distribution but does not count as taxable income. It does not go on your tax return as income at all.
In 2026, the QCD limit is $111,000 per person per year. (Source: IRS 2026.) For a retiree who already gives to charity, this is one of the most powerful tools available. Most people who would benefit from it have never heard of it.
The difference between a QCD and writing a check is significant. If you write a check to charity from your checking account, you first had to withdraw from your IRA, pay income tax on it, and then donate the after-tax amount. A QCD skips the middle step entirely. The full amount goes to the charity. None of it appears in your income. None of it pushes your Social Security toward a higher taxable threshold.
QCDs must be made directly from your IRA custodian to the qualifying charity. They cannot go through you first. Note: QCDs can only be made from IRAs, not directly from 401(k) plans. A 401(k) must be rolled into an IRA first. Ask your IRA custodian if you have ever made a qualified charitable distribution.
The $6,000 Deduction Most Retirees Have Not Used Yet
One more piece worth knowing about. The One Big Beautiful Bill, passed in July 2025, included a new $6,000 deduction for people age 65 and older. This deduction can reduce the amount of income tax you pay on your Social Security benefits. It runs through the 2028 tax year.
But it comes with income limits. The deduction begins to phase out at $75,000 for single filers and $150,000 for married couples filing jointly. Above those levels, the deduction is reduced, and at higher income levels, it disappears entirely.
Here is why this matters for coordination: the same income management decisions that reduce your provisional income and protect your Social Security from taxation also help preserve your access to this deduction. A coordinated withdrawal strategy may keep your income below the phase-out threshold. An uncoordinated one may push you past it without you realizing it until tax season.
Most retirees will not notice this deduction until their tax preparer files their return. But the decisions that determine whether you qualify are being made all year long, in every IRA withdrawal, every pension payment, and every interest payment from a savings account.
What Coordination Actually Looks Like in Practice
Income coordination is not one big decision. It is a series of smaller decisions, made throughout the year, that account for how all your income sources interact with each other.
It means knowing your provisional income before you take a large IRA withdrawal. It means checking whether you are close to an IRMAA threshold before the end of the calendar year. It means deciding each fall whether a Roth conversion makes sense at this year’s income levels before the window closes on December 31.
None of these are complicated calculations. But they require someone to look at the full picture, with all your income sources together against the current year’s thresholds, rather than managing each account in isolation.
“The families who have the most income in retirement are rarely the ones who saved the most. They are the ones who lost the least to taxes and timing decisions that nobody coordinated.”
If you have never had this conversation with your advisor, specifically about how your income sources stack against the provisional income thresholds, the IRMAA cliffs, and the RMD picture at age 73. That conversation is worth having this year.
The decisions that determine your tax bill in retirement are being made right now. They are just being made by default instead of by design.
Ready to look at how your income sources work together?
We review Social Security taxation, Medicare thresholds, Roth conversion timing, and withdrawal sequencing, as one coordinated picture, against your specific numbers.
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Also in This Issue
Is Your Retirement Income Leaving Money on the Table? Five Questions to Find Out.
A quick self-check that tells you whether your income sources are working together, or quietly costing you more than they should.
This article is provided for informational and educational purposes only and does not constitute investment advice, financial planning advice, tax advice, or legal advice. All investing involves risk, including potential loss of principal. Past performance is not a guarantee of future results. Social Security taxation thresholds and provisional income rules are based on IRS Publication 915 and current IRS guidelines. Provisional income thresholds of $25,000/$34,000 (single) and $32,000/$44,000 (married filing jointly) are from the IRS and have not been adjusted for inflation since their enactment. Medicare Part B IRMAA surcharge thresholds of $109,000 (single) and $218,000 (married filing jointly) are from the Centers for Medicare and Medicaid Services for 2026 and subject to annual revision. Medicare uses income from two years prior to determine current-year premiums. The required minimum distribution start age of 73 is per the SECURE 2.0 Act. The QCD limit of $111,000 per person is from the IRS for 2026. The $6,000 senior deduction and associated income phase-out thresholds are from the One Big Beautiful Bill Act (2025), applicable to tax years 2025 through 2028. Hypothetical scenario is for illustrative purposes only and does not represent any specific client situation. Individual results will vary. Please consult a qualified financial, tax, or legal professional before making any financial decisions. June 2026 CPI-U: -0.4% month-over-month (seasonally adjusted), +3.5% year-over-year; CPI-W: +3.5% year-over-year (Bureau of Labor Statistics, July 14, 2026). Securities offered through Cambridge Investment Research, Inc., a Broker-Dealer, Member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Langan Financial Group and Cambridge are not affiliated.
