His IRA Lost $100,000 but an $18,868 Required Withdrawal Could Still Make His Social Security Taxable
A bond market selloff wiped out six figures from his IRA, yet the IRS still expects a withdrawal calculated from the balance he had before the losses hit, and that number could quietly pull his Social Security into taxable territory.
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Bonds are supposed to be the calm part of a retirement portfolio. Take a 73-year-old retiree whose traditional IRA leaned on bond funds. A rough stretch in the bond market dropped his balance down from $500,000 to $400,000. He figures his required withdrawal will shrink along with it. This year, it won’t.
That surprise matters because of what sits next to the IRA on his tax return: Social Security. A required withdrawal counts as income, and his income is what decides whether his benefits get taxed.
Why a $100,000 Loss Doesn’t Erase an $18,868 RMD
The IRS calculates each year’s required minimum distribution (RMD) from the account balance on December 31 of the prior year. That balance gets divided by a life expectancy factor from the IRS Uniform Lifetime Table. At 73, the factor is 26.5.
His IRA held $500,000 last December 31, so the math gives about $18,868. The drop came this year, which is too late to count. Measured against today’s balance, he’s pulling out nearly 5% of what’s left.
Because 2026 is his first RMD year, he can push this withdrawal back to April 1 of next year. That delay has a catch. He would then owe two withdrawals in 2027: the $18,868 for 2026 and a second one for 2027. Stacking both into one tax year usually makes the tax hit on benefits worse. After that first year, the deadline is December 31 every year.
How the Withdrawal Can Tax His Social Security
Whether your benefits get taxed depends on what the IRS calls combined income: one-half of your benefits plus all your other income, including tax-exempt interest. A single filer’s benefits stay tax-free while combined income is under $25,000. Above that line, part of his benefits can be taxed. Above $34,000, it’s up to 85%.
The trap lies here. RMDs from a traditional IRA are taxed as ordinary income, no matter how the account performed. The IRS taxes the dollars that come out, and a bad year for bonds changes nothing about that.
Say he collects $24,000 a year in benefits and has no other income. Without the RMD, his combined income is just half his benefit: $12,000. His benefits are fully tax-free.
Assuming the withdrawal is fully taxable, adding $18,868 raises his combined income to $30,868. That brings $2,934 of his Social Security into taxable income. But with no other income, his standard deduction and senior deductions would still wipe out his federal income tax bill for 2026. Taking two RMDs next year could change that.
In this range, every extra dollar he takes out of the IRA makes another 50 cents of benefits taxable. As of early October, the Senior Citizens League projects a 3.5% Social Security COLA for 2027, which would raise his benefit and nudge his combined income higher.
Three Moves That Can Shrink the Tax Bite
- Check the year-end balance. If his IRA closes 2026 at $400,000, his 2027 RMD would be about $15,686 using the age-74 factor of 25.5. The smaller balance finally lowers his required withdrawal, just a year late.
- Choose the deadline on purpose. Taking the 2026 withdrawal by December 31 keeps it in this tax year. Pushing it to April 1 piles two withdrawals into 2027. That can push his combined income well past the $34,000 line, where up to 85% of benefits become taxable.
- Look at qualified charitable distributions if he already gives. From age 70½, he can have his IRA custodian send money straight to an eligible charity. A qualifying gift counts toward his RMD and stays out of taxable income, up to $111,000 in 2026. If his usual annual gift is $6,000, sending it this way leaves $12,868 of the RMD taxable and brings his combined income to $24,868. His benefits stay tax-free. The trade-off is that he can’t also claim a charitable deduction for that money.
The mistake that’s hardest to undo is letting the withdrawal happen on autopilot. Once the money is out and the tax year closes, the combined income figure is locked in. A few minutes with last year’s statement and a calendar before December can keep more of his benefit tax-free. The deeper issue, how a large pre-tax balance quietly builds a tax bill that hits the first year RMDs begin, is the whole subject of our free guide on defusing that first-year tax bomb.
His account has already absorbed the bond losses. This year’s withdrawal requirement is still looking at the balance he used to have.
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