How an IRA plan can make Social Security income tax-free

Retirement adviser James Mahaney published a paper describing a strategy under 2026 law that combines targeted traditional IRA withdrawals with senior tax deductions to maximize tax-free Social Security income for a married couple.

The plan uses an IRS rule that makes 15% of Social Security benefits always tax-free. Additional benefits can be excluded from federal taxable income if modified adjusted gross income (MAGI) plus half of Social Security benefits stays below $32,000 for single filers or $64,000 for married couples filing jointly.

Mahaney outlined a scenario for a 65-year-old married couple who withdraw about $28,000 from a traditional IRA and claim roughly $47,500 in senior deductions. Under the 2026 thresholds, that combination would produce about $92,000 of income without federal income tax, according to his calculations. Mahaney wrote the numbers illustrate how timing of withdrawals and account choices affect how much of Social Security can remain untaxed.

The senior deduction plays a central role in the example. The deduction allows up to $6,000 per person for older taxpayers and phases out for single filers with MAGI between $75,000 and $175,000 and for married couples filing jointly with MAGI between $150,000 and $250,000. The deduction is scheduled to expire after 2028. Mahaney wrote a similar approach could work without the deduction, but households might need smaller IRA withdrawals or accept some tax liability.

Mahaney also recommends delaying Social Security benefits to age 70 in many cases. Delaying raises monthly benefits and can limit growth in traditional IRA balances, which may reduce required minimum distributions (RMDs) later in life. He recommends Roth conversions as a tool to lower future RMDs by moving assets into accounts with tax-free withdrawals.

On asset location, Mahaney suggests holding fixed-income investments in traditional IRAs and equities in Roth accounts to slow growth of taxable IRA balances while allowing tax-free accounts to compound. David Heilich, who leads estate, gift and trust work at a CPA firm, cautioned advisors to prioritize clients’ overall financial needs and inflation protection. Heilich warned, “Be careful to not have the tax tail wag the dog,” and recommended qualified charitable distributions from IRAs for clients older than 70½ as a tax-efficient giving option.

Andy Panko, founder of an independent advisory firm, observed that larger net gains can justify some tax payments and that many retirees value financial peace of mind. Panko also noted most states do not tax Social Security income, which affects how strategies focused on untaxed benefits perform.

Mahaney said his interest in the strategy began while working on 401(k) product development at Prudential, where he noticed planners often overlooked the tax effects of delaying Social Security. He framed the trade-off this way: claiming benefits early tends to require higher IRA withdrawals over retirement, while delaying can reduce lifetime IRA distributions and related taxes.