Most retirement tax advice assumes your marginal rate rises as your income rises. Earn more, pay a higher percentage. That's how the bracket table works.
For a retiree collecting Social Security, it isn't true. There's a stretch of income where your real marginal rate climbs well above your stated bracket — and then, once you pass through it, falls back down. Your rate goes up, then down, then up again. The bracket table shows none of this.
This hump is called the tax torpedo. It's not a loophole or an obscure penalty. It's the arithmetic of how Social Security benefits become taxable, and it quietly shapes how much a dollar of IRA withdrawal actually costs you.
The formula that causes it
Social Security benefits aren't automatically taxable. Whether they are depends on a number the IRS calls provisional income (you'll also see it called combined income):
Provisional income = your AGI excluding Social Security + tax-exempt interest + half of your Social Security benefits
Compare that number to two thresholds. For single, head of household, or qualifying widow(er) filers, the first-tier threshold below which no benefits are taxable is $25,000 of provisional income; for married couples filing jointly it's $32,000. Above a second tier — $34,000 for individuals and $44,000 for couples — up to 85% of benefits can be taxed.
Two things about these thresholds matter more than the numbers themselves.
First, they are not indexed for inflation. They were set in the 1980s and 1990s and have never moved. Every year your benefit gets a cost-of-living adjustment, a little more of it crosses a line that stays put.
Second, 85% is a cap on the portion of your benefit that enters your taxable income — not a tax rate. If 85% of a $40,000 benefit is taxable, $34,000 gets added to your taxable income and is then taxed at your ordinary rate. At least 15% of your benefit is always free of federal tax, no matter how high your income goes.
Where the extra rate comes from
Here's the mechanism. Inside the second tier, every additional dollar of provisional income pulls 85 cents of previously untaxed benefits onto your return.
So one dollar of IRA withdrawal does two jobs. It's taxable income itself. And it drags 85 cents of Social Security along with it. One dollar of withdrawal becomes $1.85 of taxable income.
Multiply by your bracket:
- In the 12% bracket: 12% × $1.85 = 22.2%
- In the 22% bracket: 22% × $1.85 = 40.7%
Neither of those numbers appears in any IRS table. A retiree can be nominally in the 12% bracket and still face an effective marginal rate of 22.2%, because each extra dollar drags 85 cents of benefits along with it.
In the middle tier, where 50 cents rather than 85 cents gets pulled in, a dollar becomes $1.50 of taxable income — a 12% bracket turns into 18%.
The part people miss: it ends
This is the half of the story that almost never gets told, and it's the half that's actually useful.
The torpedo runs out of ammunition. Once 85% of your benefit is already in your taxable income, there's nothing left to drag. The multiplier drops from 1.85 back to 1.00, and your marginal rate falls back to your plain bracket.
Take a married couple, both 66, collecting $60,000 a year in Social Security, taking the 2026 standard deduction. For 2026, the standard deduction is $16,100 for single filers, $24,150 for head of household, and $32,200 for married couples filing jointly, and taxpayers 65 or older get an additional $1,650 each for joint filers or $2,050 for a single filer. Run their marginal rate as traditional IRA withdrawals increase:
| Traditional IRA withdrawal | Effective marginal rate |
|---|---|
| Up to ~$29,000 | 0% |
| ~$29,000 – $42,500 | 18.5% |
| ~$43,000 – $67,000 | 22.2% |
| ~$67,500 – $97,500 | 12% |
| Above ~$98,000 | 22% and up |
Read that table again. The couple pays 22.2% on income between roughly $43,000 and $67,000 — and 12% on income between roughly $67,500 and $97,500. Thirty thousand dollars of income taxed at nearly half the rate of the income beneath it.
Why? At about $67,000 of withdrawals, the full 85% of their benefit — $51,000 — is already taxable. The torpedo is spent. The next $30,000 is just ordinary income in the 12% bracket, which for 2026 runs to $50,400 for single filers and $100,800 for married couples filing jointly.
A single filer with $30,000 of benefits sees the same shape at smaller numbers: roughly 22.2% from $27,000 to $44,000 of withdrawals, then 12% from about $44,500 to $49,500.
What this changes
Partial withdrawals can be the worst option. The expensive dollars are the ones in the middle of the hump. Pulling $50,000 from a traditional IRA when you only needed $20,000 means the extra $30,000 came out at 22.2% — while a larger withdrawal would have reached cheaper territory.
"Stay in the 12% bracket" is bad advice here. It's the standard rule of thumb for Roth conversions, and for a retiree on Social Security it points directly into the most expensive zone. The nominal 12% bracket is where the real rate is 22.2%.
Converting before you claim is usually cleaner. The torpedo only fires when you're collecting benefits. Between retiring and claiming Social Security — often the window from 62 to 70 — provisional income has no benefit to drag in. Those years are frequently the cheapest conversion years of a person's life, and they're also the years many people leave empty.
Not all income is equal. Roth withdrawals don't count toward provisional income at all, so they can't trigger the torpedo. Return of basis from a brokerage account doesn't either — only the gain portion does. Municipal bond interest, despite being federally tax-free, does count. That surprises people who bought munis specifically to lower their tax bill.
One more deduction is in play through 2028. Taxpayers 65 and older can claim an additional deduction of up to $6,000 per qualifying individual for tax years 2025 through 2028, reduced by 6% of adjusted gross income above $75,000 for individual filers or $150,000 for joint filers. It lowers your tax but doesn't touch AGI, so it does not shrink provisional income or defuse the torpedo. It's relief, not a fix.
How to find your own hump
The shape is the same for everyone collecting benefits, but the dollar boundaries depend entirely on your benefit size, filing status, and other income. There's no universal number to memorize.
The calculation itself isn't hard, just tedious: compute provisional income, determine taxable benefits, add to AGI, subtract deductions, apply brackets — then repeat at several withdrawal levels and compare the differences. A spreadsheet handles it. What a spreadsheet handles badly is doing it across thirty years, as benefits grow with COLAs against frozen thresholds, as RMDs arrive and force income whether you want it or not, and as a conversion today reshapes every year after.
This is the sort of thing Tally models directly. Because Tally projects your full tax picture year by year to the end of your plan, it can show where your personal torpedo zone sits, how it moves as your benefit grows, and whether a conversion in your sixties is worth the tax it costs now.
The one-sentence version
Before you take a withdrawal or run a conversion, find out what the next dollar actually costs — not what the bracket table says it costs. For a retiree on Social Security, those are frequently different numbers, and the gap can run to twenty percentage points.