What tax rate will I pay on 401(k) withdrawals?

Why it is not your bracket

Your bracket is the rate on your last dollar. The withdrawal is not one dollar, it is a column of them, and they are taxed in slices from the bottom up. Here is the whole of the $60,000 example, slice by slice — a single filer, 2026, no other taxable income:

The bracket the withdrawal reaches is 12%. The rate it pays is 8.37%. Quoting the bracket overstates the tax by 3.63% of the withdrawal — $2,180 on this one. That gap is exactly why a Roth-vs-Traditional calculator that asks for “your tax rate in retirement” and takes a bracket gives the wrong answer: the number it wants is the 8.37%, and nothing on the page tells you so.

IRS Publication 575 — Pension and Annuity Income

The 20% withheld is a deposit, not a rate

This is the number most people arrive with, because it is the one printed on the statement next to the amount. A retirement plan distribution paid to you is subject to mandatory withholding of 20% — in the IRS's own words, “even if you intend to roll it over later”. It is the same 20% for everyone. It knows nothing about your deduction, your filing status or your other income, so it cannot be your tax rate except by coincidence:

Withheld at source

$12,000

20% of the distribution

Federal income tax owed

$5,020

8.37% of the distribution

Lent to the Treasury

$6,980

refunded the following spring

An IRA is not the same: the default there is 10%, and you can elect out of it entirely. On the same withdrawal that is $6,000 withheld and $980 over — closer, and still not the tax.

20% only becomes the right amount at about $239,133 withdrawn in one year — that is where a single filer's effective rate finally catches up with it, and below it the plan is always taking more than the withdrawal costs. We have not seen that figure published anywhere, so it is computed here rather than cited: withholdingBreakEven(20) inverts the same function that produced the table above, and a test checks that the rate really does cross 20% there.

The direction reverses at the small end too, and more starkly. A $10,000 withdrawal by that same filer owes $0 in federal income tax — it fits inside the standard deduction — and still has $2,000 taken out of it.

What pushes the rate up: everything else in the same year

The figures above are a floor, and the reason is the same arithmetic that made them low. The deduction and the cheap brackets go to whichever dollars arrive first. If a pension, a spouse's wages, interest or another account's required distribution got there first, the withdrawal starts higher up the schedule and every slice of it costs more. Same $60,000 withdrawal, same filer, varying only what is stacked underneath it:

The rate on the withdrawal more than doubles across that table without the withdrawal changing at all. And notice where it crosses: at $60,000 of other income the 20% that was $6,980 too much in the first row is $550 too little. Withholding is not conservative; it is just fixed.

Two more things raise it that this page does not compute, and they are named here rather than omitted. State income tax — Far Better Off models federal tax only, and most states tax retirement income to some degree while a few exempt it. And Social Security: a withdrawal can make more of your benefit taxable, which raises the tax on income you already had. That interaction is real, it is second-order, and it is not modelled here — so if you are drawing a benefit, read every rate on this page as an understatement.

Two ages that change the answer

Before 59½, an additional tax of 10% applies unless an exception fits. It is charged on the distribution, not on the tax, so it does not interact with any of the arithmetic above — it simply lands on top. On the $60,000 example that is $6,000 added to $5,020, $11,020 in all, an all-in federal rate of 18.37%. The exceptions are a real list rather than a formality — disability, death, substantially equal periodic payments, qualified birth or adoption, certain medical expenses, a domestic-abuse distribution, separation from service at 55 or later for a workplace plan — and the IRS publishes the whole table with the code section for each.

At 73, required minimum distributions begin, though the first one can be deferred to April 1 of the following year. Deferring is worth a second thought for the reason this whole page is about: two RMDs then land in the same calendar year, stack on each other, and raise the effective rate on both. A participant still working for the employer sponsoring the plan can generally delay their plan RMDs until they retire, unless they own 5% or more of the business. Roth IRAs and designated Roth accounts have no RMDs while the owner is alive.

IRS Topic no. 558 · Exceptions to tax on early distributions · RMD FAQs

Use this answer in your own software

Every figure on this page is computed by the same library a keyless JSON endpoint answers from — no signup, no API key, CORS open to every origin — so a number quoted here and a number from the API cannot disagree:

curl "https://farbetteroff.com/api/v1/roth-vs-traditional?taxNow=22&taxRetire=22&withdrawal=60000"

The response's retirementRate carries the 8.37%, the 12% bracket beside it, the $16,100 taxed at nothing, and the bands the table above is drawn from. See the full API docs.

Common questions

What tax rate will I pay on 401(k) withdrawals?

Ordinary income tax rates, but at an effective rate, not at your bracket — and the 20% your plan withholds is neither. A withdrawal from a pre-tax 401(k) or traditional IRA is ordinary income that fills the brackets from the bottom, so the standard deduction shelters the first dollars at 0% before any bracket applies. In 2026, a single filer withdrawing $60,000 with no other taxable income reaches the 12% bracket but owes $5,020 in federal income tax — an effective rate of 8.37%, with $16,100 of the withdrawal taxed at nothing at all. The plan would withhold $12,000 of that same withdrawal, because 20% withholding is mandatory on a plan distribution paid to you — $6,980 more than the tax, refunded the following spring. Withholding is a deposit, not a rate.

Is my 401(k) withdrawal taxed at my tax bracket?

No — the bracket is the rate on your last dollar, not on the whole withdrawal. A pre-tax withdrawal is ordinary income stacked from the bottom of the rate schedule, so it is taxed in slices: the standard deduction ($16,100 for a single filer in 2026) at 0%, then each bracket in turn. On $60,000 that works out as $12,400 at 10% and $31,500 at 12% — $5,020 in total, or 8.37% of the withdrawal. The 12% bracket overstates what you actually pay by 3.63% of the withdrawal. This is why entering a bracket as "my tax rate in retirement" in a Roth-vs-Traditional calculator gives the wrong answer.

Why did my plan withhold 20%? Is that my tax rate?

No. A retirement plan distribution paid to you is subject to mandatory withholding of 20%, in the IRS's own words "even if you intend to roll it over later". That figure has nothing to do with your circumstances — it is the same 20% for everyone, a deposit against a bill computed on your return months later. On the $60,000 example the plan sends $12,000 to the IRS against $5,020 of actual tax, so $6,980 comes back as a refund, having earned nothing in the meantime. An IRA is different: the default there is 10% and you can elect out of it entirely.

When is 20% withholding actually the right amount?

When the withdrawal is large enough that its effective rate catches up. For a single filer with no other taxable income that happens at about $239,133 withdrawn in one year — below that the plan is taking more than the withdrawal costs, above it, less. Almost nobody withdraws $239,133 in a year, which is why over-withholding is the normal case rather than an edge case. The figure moves with your filing status and drops sharply once other income is stacked underneath.

What makes my effective rate higher than these figures?

Anything else taxable arriving in the same year. The withdrawal stacks on top of your other ordinary income, so the deduction and the low brackets are already spent by the time it arrives. Adding $40,000 of other taxable income to the $60,000 example takes the rate on the withdrawal from 8.37% to 17.58% — more than double. Pensions, a spouse's wages, interest, and required distributions from other pre-tax accounts all count. So do two things this page does not model: state income tax, and the way a withdrawal can make more of your Social Security benefit taxable. Read every figure here as a floor.

What if I withdraw before 59½?

An additional tax of 10% applies on top of the income tax, unless one of the statutory exceptions fits. It is charged on the distribution itself, not on the tax — so on the $60,000 example it adds $6,000 to $5,020 of income tax, $11,020 in all, an all-in federal rate of 18.37%. The exceptions are a real list, not a formality: disability, death, substantially equal periodic payments, qualified birth or adoption, certain medical expenses, a domestic-abuse distribution, and separation from service at 55 or later for a workplace plan, among others. The IRS publishes the full table with the code section for each.

Do I have to take withdrawals at 73?

Generally yes, from a traditional IRA, SEP or SIMPLE IRA and from retirement plan accounts: required minimum distributions begin in the year you reach 73, though the first one can be deferred to April 1 of the following year. Deferring it means two RMDs land in the same calendar year, which stacks them and — per the effective-rate arithmetic above — raises the rate on both. A participant still working for the employer sponsoring the plan can generally delay their plan RMDs until retirement, unless they own 5% or more of the business. Roth IRAs and designated Roth accounts have no RMDs during the owner's lifetime.

Is a Roth withdrawal taxed at all?

A qualified Roth distribution is not taxed, which is the whole point of having paid the tax up front. That is what makes the effective-rate correction matter for the choice between the two accounts rather than only for the withdrawal: the fair comparison is your rate today against the effective rate you would actually pay later, and the effective rate is far lower than the bracket most people plug in. Far Better Off's Roth vs Traditional calculator runs that comparison, and the API returns the effective rate alongside it.