Fidelity’s record crop of 401(k) millionaires may not own as much as they think, and a clock is already ticking on a tax obligation they cannot negotiate, defer, or skip.
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Fidelity Investments just counted 769,000 401(k) millionaires on its platform at the end of June, up from 654,000 the previous quarter, as Yahoo Finance reported. Most of those balances are pretax. The IRS owns a slice of every account, and it will start collecting on a schedule the account holder does not get to pick.
The average Fidelity 401(k) millionaire, per Fidelity Investments, is 58 years old and has been saving for an average of 25 years. That puts this cohort inside a 15-year runway before required minimum distributions begin, and a shrinking window to do anything about the deferred tax bill.
Why a Seven-Figure Traditional Balance Is a Deferred IOU
A traditional 401(k), named for subsection 401 of the Internal Revenue Code per the Internal Revenue Service, lets you skip income tax on contributions today. The bargain: every dollar comes out as ordinary income later. A $1 million balance is really somewhere around $700,000 to $780,000 of your money and the rest is a running tab with the Treasury.
Under SECURE 2.0, the IRS sets the RMD start age by birth year, according to Internal Revenue Service. Born 1951 through 1959, RMDs begin at 73. Born 1960 or later, RMDs begin at 75. Miss one and the penalty is 25% of the amount you should have taken, 10% if corrected quickly.
First RMD in Real Dollars, on a $1.2 Million Account
Consider a 73-year-old with $1.2 million in a traditional 401(k) on December 31 of the prior year, according to Internal Revenue Service. The Uniform Lifetime Table divisor at 73 is 26.5, which produces a first RMD in the mid-$45,000s. Fully taxable as ordinary income, on top of Social Security and any pension.
Stack that on a joint filer already reporting $60,000 of other income and the marginal federal rate lands in the 22% bracket for 2026 [VERIFY: 2026 MFJ 22% band]. That same withdrawal can push provisional income high enough to make 85% of Social Security taxable, and the two-year IRMAA lookback can reprice Medicare Part B and Part D premiums in 2028. One withdrawal, three tax effects.
Planning Window Between Retirement and RMDs
The most valuable tax real estate for this group is the gap between the last paycheck and the first RMD. Income drops. Brackets open up. That is the window for partial Roth conversions: move a slice of the traditional 401(k) or rollover IRA into a Roth, pay tax now at 12% or 22%, and shrink the future RMD base, according to Internal Revenue Service.
The math only works if today’s bracket sits at or below tomorrow’s. A converter in the 24% bracket who will spend retirement in the 12% bracket is prepaying tax at a premium. This is a manageable planning challenge, and the reader’s own bracket determines whether converting makes sense (we sized up that quiet stretch between the last paycheck and the first RMD in a free Roth Window guide here).
Two More Levers Most Millionaires Overlook
- Roth 401(k) contributions. Roth 401(k) money grows tax-free and, under SECURE 2.0, is no longer subject to lifetime RMDs from the plan. Workers age 50 and up who earned more than $150,000 in 2025 must direct their catch-up contributions to a Roth 401(k) in 2026, according to Internal Revenue Service. The catch-up cap is $8,000 over the standard $24,500 limit, and workers ages 60 to 63 get a super catch-up of $11,250.
- Qualified charitable distributions. Starting at age 70½, you can send up to $108,000 in 2026 [VERIFY: 2026 QCD annual limit] directly from an IRA to a qualified charity. The QCD counts toward the RMD and never lands in adjusted gross income, which keeps IRMAA and Social Security taxation contained.
What to Watch Next
The 2027 Social Security COLA is currently tracking toward 3.1% with 1 of 3 Q3 months in, per Social Security Administration data. Bigger checks mean more of the benefit gets exposed to tax when combined with RMDs, sharpening the case for using the pre-RMD window while brackets are wide open.
Market tailwinds helped inflate this cohort: the S&P 500 is up 18.06% over the past year and 70.61% over five years. That same appreciation is exactly what makes the deferred bill bigger. Anyone within 10 years of their RMD start age should model a partial-conversion ladder with a fiduciary advisor or CPA before the first distribution locks the bracket in.
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