$1.5 million in your 401(k)? Here’s what your RMD taxes will look like — and the very best trick to lower them

Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.

Ever wondered what it would be like to have seven-figures in your 401(k) plan? Well, for at least 769,000 Americans, that's a reality. That's the number of people with at least $1 million in their 401(k) at the end of June 2026, according to Fidelity data cited by Yahoo Finance (1).

That's a tiny fraction of adults with retirement accounts. If you're in this club, you're extremely lucky. You're also sitting on a relatively large IOU to the tax authorities. At age 73, the Internal Revenue Service (IRS) (2) imposes required minimum distributions (RMDs), which are generally taxed as ordinary income.

Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one

JPMorgan sees gold hitting $5,000/oz by Q4 — and savvy investors are protecting their wealth with a tax-advantaged Gold IRA. Get your free guide from Priority Gold

The tax breaks in Trump's 'big beautiful bill' expire after 2028. Here are 4 moves to make before the window closes

Every dollar in a traditional 401(k) is pre-tax money. The government lets you defer the bill, but not entirely avoid it. So, if you're on track to enter this exclusive club of 401(k) millionaires or already part of it, this aspect of your tax situation deserves special attention. Here's what the RMDs for a hypothetical $1.5 million account could look like.

The way RMDs are calculated and implemented is complex. Complicating things further is the fact that an RMD isn't a fixed amount; it changes every year based on your age and the amount of money left in the account.

The first step, according to the IRS (2), is to figure out how much all your combined tax-deferred accounts are worth as of December 31 of the previous year. Next, use the IRS Uniform Lifetime Table (3) to determine your "distribution period." A distribution period is the tax authorities' estimate of your life expectancy based on age, so the calculation is focused on helping you completely draw down these balances within that time.

For someone aged 73, the distribution period is 26.5. If this person happens to have $1.5 million in their 401(k) plan, their first RMD would be $56,603 ($1.5 million ÷ 26.5). That's a substantial amount of income for a single year. Depending on this retiree's other sources of income, from Social Security to pensions, this amount could be enough to push them into a higher tax bracket.