How much tax will I pay on a retirement withdrawal?

The short answer

There is no special "withdrawal tax rate." Money coming out of a traditional retirement account is ordinary income, taxed exactly like salary at whatever bracket it lands in. Because it lands on top of your other income, the marginal rate on the withdrawal is usually higher than your average rate — and a large withdrawal can straddle two brackets, with part taxed at 22% and part at 24%.

Before age 59½ there is a second charge: a flat 10% additional tax under section 72(t), applied to the whole taxable amount regardless of your bracket. That is the number that turns a 22% withdrawal into a 32% one.

Worked example: $50,000 at age 45

Single filer, $80,000 of wages, taking $50,000 from a traditional 401(k). The 2026 standard deduction is $16,100.

• Tax without the withdrawal. Taxable income is $80,000 − $16,100 = $63,900. That is 10% on the first $12,400 ($1,240), 12% on the next $38,000 ($4,560), and 22% on the remaining $13,500 ($2,970) — $8,770.
• Tax with the withdrawal. Taxable income becomes $130,000 − $16,100 = $113,900. Same first two bands, then 22% on $55,300 ($12,166) and 24% on $8,200 ($1,968) — $19,934.
• Federal tax caused by the withdrawal: $19,934 − $8,770 = $11,164, or 22.3% of the $50,000.
• Early-withdrawal penalty: 10% × $50,000 = $5,000.
• Total federal cost: $16,164 — 32.3%. You keep $33,836, before any state tax.

Notice what the penalty does. Ignore it and the withdrawal looks like a 22% decision. Include it and you are handing over nearly a third of the money — before your state takes anything.

Wait until 59½ and the same withdrawal costs $11,164

Identical numbers at age 62: the income tax is unchanged at $11,164, the penalty is zero, and you keep $38,836. Five thousand dollars is the entire price of the calendar. If the money is not needed this quarter, the single highest-return move available is usually to wait.

The 10% penalty and the exceptions that beat it

The additional tax does not apply if your distribution fits one of the IRS exceptions. Several are commonly missed:

• The "rule of 55." If you separate from service in or after the calendar year you turn 55, distributions from that employer's plan are penalty-free. It does not apply to IRAs — rolling the 401(k) to an IRA first destroys the exception. Qualified public-safety employees get it at 50, or after 25 years of service.
• Substantially equal periodic payments (SEPP, section 72(t)). A fixed schedule of withdrawals calculated on your life expectancy, penalty-free at any age, but it must run for five years or until 59½, whichever is longer. Break it early and the penalty is applied retroactively with interest.
• Total and permanent disability, and distributions to a beneficiary after death.
• Unreimbursed medical expenses above 7.5% of your adjusted gross income — the exception covers the excess, not the whole withdrawal.
• Health insurance premiums while unemployed, qualified higher-education expenses, and up to $10,000 lifetime toward a first home — all IRA-only.
• Birth or adoption, up to $5,000 per child per parent.
• Terminal illness, domestic abuse (up to $10,000 or half the account), and one emergency personal expense of up to $1,000 a year — all added by SECURE 2.0.
• An IRS levy, a QDRO in a divorce (employer plans), and qualified disaster distributions.

Every one of these removes the 10%. None of them removes the income tax.

The 20% withholding that surprises people

Ask a 401(k), 403(b) or governmental 457(b) plan for $50,000 and $40,000 arrives. Employer plans are required to withhold 20% federal tax on any distribution eligible to be rolled over — you cannot opt out. That 20% is a prepayment credited on your return, not a separate tax, so it usually undershoots what you actually owe once the penalty is added.

IRAs work differently: withholding defaults to 10% and you can raise, lower or waive it. Either way, if you need $50,000 of spendable cash you have to gross the request up — and grossing up means a bigger taxable withdrawal, which is why these decisions compound badly.

2026 federal ordinary-income brackets

These apply to taxable income — income after your standard deduction of $16,100 (single) or $32,200 (married filing jointly).

• 10% — up to $12,400 single / $24,800 joint
• 12% — to $50,400 / $100,800
• 22% — to $105,700 / $211,400
• 24% — to $201,775 / $403,550
• 32% — to $256,225 / $512,450
• 35% — to $640,600 / $768,700
• 37% — above that

Five ways to pay less

• Split it across two tax years. $40,000 in December and $40,000 in January fills the lower brackets twice. A single $80,000 withdrawal may push half of it into the next band.
• Take it in a low-income year. The gap between stopping work and claiming Social Security is often the cheapest withdrawal window anyone gets — and the same window is where Roth conversions are cheapest.
• Check the exception list first. A medical or education withdrawal structured correctly saves 10% outright.
• Spend from the right account. Taxable-account money often costs far less than pre-tax money, because only the gain is taxed and long-term gains have their own lower rates. The withdrawal order calculator compares the options.
• Use a qualified charitable distribution at 70½+. Up to the annual limit goes straight from an IRA to a charity, counts toward your RMD, and never appears in your income at all.

Mistakes that cost the most

• Rolling to an IRA before using the rule of 55. One transfer can cost 10% of every dollar you take between 55 and 59½.
• Assuming the 20% withheld is the bill. With the penalty, the true cost is often 30%+; the shortfall shows up in April, sometimes with an underpayment charge.
• Ignoring what the extra income touches. A large withdrawal can push more of your Social Security into tax, trip a Medicare IRMAA bracket two years later, or push long-term capital gains out of the 0% band.
• Missing the 60-day window on an indirect rollover. Take the cash intending to redeposit it, miss 60 days, and the whole amount becomes a taxable distribution — including the 20% the plan withheld, which you had to replace from your own pocket to roll the full amount.

Frequently asked questions