Saving too much in your 401(k) is impossible, right? We’re supposed to keep stuffing it until it looks like the Marshmallow Man marching through Manhattan!

Maxing out contributions is smart early in our careers to get the full benefit of the Accenture 6% 401(k) match and experience the magic of compounding investments.

It’s also quite appealing later in our careers when the tax deferral can mean saving over 40% on combined state and federal taxes. However, MDs stop receiving the 6% match, but total compensation makes up for it.

These advantages combined with the 401(k) tax-free growth make it an incredible savings opportunity.

So why would we ever stop?

How large 401(k)s can turn bad

There are four main concerns as you reach retirement age and start living off your nest egg. They are social security taxes, Medicare premiums, required minimum distributions (RMDs), and federal/state taxes.

Each of these is triggered or increased as incomes increase, so let’s talk through how they work.

A. Social Security taxes

Believe it or not, your social security income is taxed when you start receiving it, and you’re over a certain income. It’s probably a safe assumption that all Accenture MDs will have the total amount taxed due to a lifetime of savings and investing.

If you and a spouse received max benefits when claiming social security at age 70, your social security income could easily be a combined $80,000 and 85% of the $80k is taxed as income ($68,000).

Depending on your situation, that’s why it’s good to wait until age 70 to receive social security benefits because you max them out and avoid a few years of higher taxes versus taking it at 66.

B. Medicare Premium (IRMAA)

The good news is you can start receiving Medicare at age 65. The bad news is you have to pay Medicare premiums over certain incomes.

You’ll probably never hear about IRMAA until you receive a letter in the mail telling you you’ll start paying it after age 65. Read my full IRMAA explanation here, but let’s talk through one example.

If you’re making over $275,000 in retirement and file married filing jointly, your Medicare premium for Parts B and D will tack on an additional $426 per spouse per month. That’s an extra $10,000 you’ll pay the government each year.

IRMAA maxes out at $568 per spouse with incomes above $413,000, or over $13,000 extra each year.

C. Required Minimum Distributions (RMD)

What, did you think the government was going to let you grow that 401(k) tax-deferred forever? No way, they want to start getting their cut for taxes, and this will happen at age 72.

A required minimum distribution impacts 401(k) and IRAs and forces you to remove a percentage of funds each year, which are taxed as income.

It doesn’t matter if you need the money or not. You still have to pull it out and count it as income. View the tables here, but a rough estimate is 4% of the total amount at age 72.

D. Federal and State taxes

We’re most familiar with this impact as we happily pay our state and federal taxes today. Nothing changes in retirement – the government still gets a cut.

However, one small incentive is some states don’t have income taxes, and other states won’t tax your social security.

We’ll walk through an example below, but you can probably guess which way federal taxes will go from here. My guess would be higher, especially since we already know taxes will increase in 2026 when the Tax Cuts and Job Act (TCJA) expires.

Case Study: Why your 401(k) could be too large

Who’s ready to nerd out? It will get a little complicated, but let’s walk through an example to see how it all stacks up.

• Family: The Jaggers
• Age: 55
• Retirement goal: 60
• Current 401(k)/IRAs: $4,000,000

The Jaggers have done an excellent job saving and are choosing to retire at age 60. They’ve saved $4M in their combined 401(k) and IRA plans.

These two plans are essentially the same when it comes to retirement, so we’ll lump them together. Most people will roll their 401(k) into an IRA anyway, so let’s stick with the term IRA.

The Jaggers plan to live off 4% of their IRA balance, which will give them roughly $160,000 of taxable income per year, and increasing as their account grows. They’ll delay social security until age 70 as they’re both healthy.

Let’s jump ahead to age 72 with the RMDs start and assess their situation. Their investments averaged an 8% return, and as discussed earlier, they removed 4% each year.

• 401(k) balance at 72: $8M

That’s right, even after removing 4% of their IRA balance each year, they’ve still managed to double the account value with an 8% return. Now the RMDs start.

Based on the current IRS table, their RMD at 72 is roughly 4%, which now equals $320,000 per year! What does that mean for taxes?

Age 72 tax update

• Social Security: $80,000 ($68,000 taxed)
• RMD: $320,000
• Capital gains / dividends: $30,000
• Medicare premium: $10,000 per year

Let’s assume federal taxes have only increased to the 2026 levels and not beyond that. When we add their Medicare premium, the Jaggers are paying taxes at age 72 at an equivalent tax rate of making $470,000 today!

That’s right, they’re paying as much in taxes at 72 as someone today pays if they’re making $470,000 per year. And yes, they only have $430,000 of income.

They’re paying a higher percentage of taxes because of the Medicare premium and the increase in tax rates. If rates go up more, well, you know what that means.

So how much should you save in a 401(k)/IRA?

It might not make sense to make the same moves like Jagger (you knew that was coming, right).

I’ll walk through an example with the Jaggers, but please know all of this is educational only, and you shouldn’t be using it as advice for your specific situation. Enlist the help of a professional (like me).

Financial planning becomes very valuable in this situation because it can save you a considerable amount in taxes and income.

I would have preferred the Jaggers reach out to me at age 50 when we have some more years to steer the ship in the right direction.

If the Jaggers were like you and retired as an Accenture Managing Director, they undoubtedly had a lot of Accenture stock and other brokerage account investments.

Instead of pulling money from their IRA at age 60, it could’ve made more sense to live off stock sales, especially if they were in a low enough tax bracket to avoid capital gains taxes.

Additionally, they could use their time from age 60 to age 70 to complete Roth conversions on their IRA to reduce the inevitable RMD. This only makes sense if you’re in a low tax bracket in your 60s.

With the critical assumption that they have enough stocks to live off in their 60s, they won’t even need to touch their IRA until age 72, giving it 12 more years to grow.

In the example above, the Jaggers $4M would grow to over $14M in 17 years with an 8% return. The RMD would then be closer to $600k, skyrocketing their taxes.

Instead, it might make sense for the Jaggers to shoot for $2M in their 401(k) and IRA, which could still grow to over $7M in 17 years.

They could use the rest of the time (from age 50 to age 60) to build up Roth accounts through the Roth 401(k) and the Accenture after-tax 401(k) option.

One last disclaimer, it’s critical you work with a professional when you start planning these complicated moves. Otherwise, it’s a little bit like trying to perform heart surgery on yourself!