Retiring Soon? Social Security, Medicare and Taxes: The Basics

A plain-English overview for anyone who is new to the U.S. retirement system. Figures for 2026. Updated October 8, 2026.

There is no single "government pension" in the United States that everyone receives at a certain age. Retirement income is built from several separate pieces, and each one has its own rules, its own starting age and its own tax treatment. This short guide explains how the pieces fit together and the decisions that matter most, based on official IRS, Social Security and Medicare sources.

The Pieces of Retirement Income

For an average earner, Social Security replaces only about 40% of pre-retirement income. The rest has to come from your own savings, which is why retirement planning is mostly about two things: saving, and paying as little tax as possible when you take the money out.

Social Security: Who Gets It and When to Start

• You qualify after 40 credits, which is usually 10 years of work. In 2026, every $1,890 of earnings gives one credit, up to 4 a year.
• Your benefit is based on your 35 highest-earning years. If you worked fewer than 35 years, the missing years count as zeros.
• You can start as early as 62, but the benefit is permanently reduced by about 30%. The full amount comes at your Full Retirement Age (67 if you were born in 1960 or later). Each year you wait after that adds 8%, up to age 70.
• If you start before Full Retirement Age and keep working, Social Security holds back $1 for every $2 you earn above $24,480 (2026). You get it back later as a higher benefit.
• A spouse with little or no work history can receive up to 50% of the other spouse's full benefit, and a widow or widower can receive up to 100% of the deceased spouse's benefit.

Create a free my Social Security account at ssa.gov to see your estimated benefit at 62, at Full Retirement Age and at 70, and to check that your earnings history is complete.

Medicare at 65: Don't Miss the Deadline

• You become eligible at 65, whether or not you have started Social Security. If you're already getting Social Security, you're enrolled automatically. If not, you have to sign up yourself.
• Your sign-up window is 7 months: 3 months before the month you turn 65, that month, and 3 months after.
• Signing up late for Part B adds 10% to your premium for life for every full year you were late. Part D (drugs) has its own lifetime penalty.
• If you're still working at 65 and have health insurance through a current employer with 20 or more employees, you can usually delay Part B without a penalty. COBRA and retiree coverage don't count as coverage from a current employer.
• The standard Part B premium is $202.90 a month in 2026. With higher income (above $109,000 single or $218,000 joint, based on your tax return from two years earlier), you pay more. This surcharge is called IRMAA.

Your Retirement Accounts

• Traditional accounts give you a tax break now, and every dollar you withdraw later is taxed. Roth accounts give no break now, but qualified withdrawals (after age 59½ and 5 years) are completely tax-free.
• Withdrawals before 59½ usually carry a 10% penalty on top of the regular tax. There are exceptions. For example, if you leave your job in or after the year you turn 55, you can take money from that employer's 401(k) without the penalty.
• When you leave a job, the safest way to move a 401(k) to an IRA is a direct rollover. If the check is made out to you, the plan holds back 20% for tax, and you have only 60 days to deposit the full amount.
• Required Minimum Distributions (RMDs): starting at 73 (or 75 if you were born in 1960 or later), you must withdraw a minimum amount from traditional accounts every year. Missing one costs 25% of the amount you didn't take, but the IRS often waives this penalty if you fix the mistake quickly. Figure your RMD, or the tax on a missed one, with our free RMD & Missed RMD Penalty Calculator.

How Retirement Income Is Taxed

• Pensions and withdrawals from traditional accounts are taxed as ordinary income, at rates of 10% to 37%.
• Up to 85% of your Social Security can be taxable, depending on your other income. If Social Security is your only income, it is usually not taxed at all. Check your own numbers with our Social Security Benefits Tax Calculator.
• For 2025 through 2028, people 65 and older get an extra $6,000 senior deduction ($12,000 for a married couple who are both 65+), on top of the larger standard deduction for seniors. It phases out above $75,000 of income ($150,000 joint). This new law did not eliminate the tax on Social Security, but for many retirees it brings the tax down to zero.
• No one withholds tax for you automatically in retirement. You can have tax withheld from Social Security (Form W-4V), from a pension (Form W-4P) and from IRA withdrawals (Form W-4R), or you can pay estimated tax every quarter. Otherwise you may owe money and an underpayment penalty in April.
• Florida has no state income tax, so Social Security, pensions and IRA withdrawals are taxed only by the federal government.

Example. A married couple, both 66, receives $40,000 of Social Security, a $30,000 pension and $20,000 from an IRA, plus $2,000 of interest. Only $29,800 of their Social Security is taxable. After the standard deduction and the senior deduction ($47,500 in total), their federal tax is about $3,620, roughly 4% of their $92,000 income.

Five Things to Do in the Year Before You Retire

1. List every account you have: old 401(k)s, IRAs, pensions, HSAs and annuities.
2. Decide when to start Social Security, together with your spouse if you're married.
3. Put the Medicare sign-up date in your calendar, and if you retire before 65, plan your health insurance until then.
4. Choose how your pension will be paid (single life or joint with your spouse) and whether to roll your 401(k) over to an IRA.
5. Set up tax withholding, and ask a tax professional about the low-tax years right after you retire, which are often the best time for Roth conversions.

Try Our Calculators

See how much of your Social Security is taxable and estimate your federal tax with our free Social Security Benefits Tax Calculator. To check whether itemizing beats the standard deduction once the senior deduction is added, use the Standard vs Itemized Deduction Calculator. Turning 73 (or 75), or missed a withdrawal? The RMD & Missed RMD Penalty Calculator figures your required minimum distribution and the tax on a shortfall.

Bottom Line

Retirement in the U.S. comes with deadlines that can't be undone, like Medicare sign-up, your Social Security start date and RMDs, and with tax decisions that add up over 20 or 30 years. Make the big decisions a year ahead, with your spouse, and with your whole tax picture in front of you.

This article is general information, not tax, legal or investment advice for your specific situation.

Official Sources

• Social Security Administration, Retirement benefits
• SSA, 2026 Social Security Changes (COLA Fact Sheet)
• Medicare.gov, Get started with Medicare
• Medicare.gov, Medicare costs
• IRS Publication 554, Tax Guide for Seniors
• IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• IRS, Retirement plan and IRA required minimum distributions FAQs
• IRS, One Big Beautiful Bill Act: tax deductions for working Americans and seniors