Retirement Withdrawal Strategy
Your withdrawal order decides how much you keep, and how much goes to Uncle Sam.
You've built the balance. Now every dollar you pull out has a tax consequence attached to it. The order you draw from taxable, tax-deferred, and Roth accounts determines the most you can safely spend, how long your savings last, and what you pay in taxes. A tax-first withdrawal plan sequences those withdrawals on purpose, instead of leaving the order to chance.
Who This Is For
You've Saved the Balance. Now Someone Needs to Plan the Drawdown.
This page is built for married couples 50 and older with $2 million or more saved in 401(k)s and IRAs who are within about ten years of retirement, or already retired, and want to know exactly which account to draw from first, second, and last.
You and your spouse are 50 or older, with $2 million or more sitting in 401(k)s and IRAs, built through years of steady saving and market growth, and you're starting to ask how you'll actually turn that balance into a paycheck.
You know the order you pull money out of your accounts changes your tax bill, but nobody has shown you what that order looks like with your actual numbers.
You're watching required minimum distributions, Social Security, and Medicare premiums all get closer to landing on the same tax return, and you want a withdrawal plan built before that happens, not after.
You'd rather spend more now, while you're healthy and active, than leave the largest possible balance behind when you die.
If that sounds like your situation, a tax-first withdrawal plan, the kind built into the Retire Ready Roadmap™, starts with getting your withdrawal order right, so you keep more of what you built.
How It Works
A Tax-First Withdrawal Plan, Built Around Your Numbers
Here's the short version of how a tax-first withdrawal order comes together. For the broader tax-planning picture behind it, see Retirement Tax Planning.
Step 01 · Analysis
Your Accounts Get Modeled Together
Your taxable, tax-deferred, and Roth balances get modeled alongside your tax bracket and Social Security timing, to find the withdrawal order that keeps the most in your pocket.
Step 02 · Execution
Your Withdrawal Order Gets Set
You get a plan for which account to draw from first, second, and last, tied to your RMD age, IRMAA thresholds, and spending needs, not a generic rule of thumb.
Step 03 · Ongoing
Your Plan Gets Adjusted
Tax law changes. Markets move. Your life changes. Your withdrawal order gets revisited every year so it stays matched to what's actually happening, not what applied when the plan was built.
Withdrawal Order
Which Accounts to Draw From First, and Why
Start with taxable accounts. Money in a brokerage account has already been taxed once, on the income that funded it. Selling investments there triggers capital gains tax, often at a lower rate than ordinary income tax, and only on the gain, not the full withdrawal. Every year you leave your 401(k) and IRA balances untouched, they keep compounding without a tax bill attached.
Draw from tax-deferred accounts next: traditional 401(k)s and traditional IRAs. Every dollar that comes out gets taxed as ordinary income, at whatever bracket you're in that year. This is where required minimum distributions eventually force your hand. Starting at age 73, or 75 if you were born in 1960 or later, the IRS requires you to withdraw a minimum amount from these accounts every year, whether you need the cash or not. Sequencing withdrawals from tax-deferred accounts before RMDs begin gives you control over when and how much gets taxed, instead of letting the IRS set the schedule for you.
Save Roth accounts for last. Qualified withdrawals from a Roth IRA or Roth 401(k) come out tax free. Every year you leave that money alone, it grows without adding a single dollar to your taxable income. Holding Roth withdrawals in reserve gives you a lever to pull in a year when your income already runs high, without pushing you into a higher bracket. Sequencing your withdrawals this way means you pay less to Uncle Sam over your lifetime, not just this year.
That order, taxable, then tax-deferred, then tax-free, isn't fixed for every household. A Roth conversion, moving money from tax-deferred to tax-free ahead of retirement, can change how much sits in each bucket before you start withdrawing at all. See Roth Conversion Strategy for how conversions complement your withdrawal order.
Social Security
Coordinating Withdrawals With Social Security
When you claim Social Security changes your withdrawal order, and your withdrawal order changes how much of your Social Security benefit gets taxed. The two decisions aren't separate.
Up to 85% of your Social Security benefit can be taxed, depending on your provisional income: your adjusted gross income, plus tax-exempt interest, plus half your Social Security benefit. Withdrawals from tax-deferred accounts count as ordinary income and raise your provisional income dollar for dollar. A large withdrawal in the same year you're collecting Social Security can push more of your benefit into taxable territory.
Delaying Social Security to age 70 increases your monthly benefit and gives you a gap, the years between retirement and age 70, where you have no benefit to protect from taxation. Drawing from taxable accounts during that gap keeps your reportable income low, lets your tax-deferred accounts keep compounding, and can reduce how much of your eventual Social Security benefit ends up taxed once it starts.
Coordinated this way, withdrawal order and Social Security timing work together instead of against each other. The result is usually a lower lifetime tax bill than claiming early and drawing from whichever account happens to be easiest to reach.
Medicare Costs
Avoiding IRMAA Through Drawdown Order
Medicare premiums aren't flat. IRMAA, the Income-Related Monthly Adjustment Amount, adds a surcharge to your Part B and Part D premiums once your modified adjusted gross income crosses a threshold. The surcharge is based on your MAGI from two years earlier, so a high-income year today can raise your premiums two years from now.
Withdrawal order is one of the few levers you control. A large withdrawal from a tax-deferred account in a single year can push your MAGI over an IRMAA threshold you didn't see coming. Spreading that same withdrawal across two or three years, instead of taking it all at once, can keep you under the line.
Roth withdrawals don't count toward MAGI at all. In a year when you're already close to an IRMAA threshold, drawing from a Roth account instead of a tax-deferred account can keep your income below it. Capital gains harvesting, selling appreciated taxable holdings in a year your income already runs low, works the same way: it uses room in a lower bracket instead of adding to a year that's already crowded.
Because of the two-year lookback, this isn't a decision you make once. It's a decision you make every year, with an eye on the return you'll file two years from now, not just the one you're filing today.
Spending
Maximizing Safe Spending in Early Retirement
The first years of retirement, sometimes called the go-go years, are usually the most active years you'll have. You travel more, take on projects, and spend more, while your health and energy are still there to enjoy it.
A flat withdrawal rate, like the 4% rule, assumes your spending stays roughly the same every year of retirement. That assumption doesn't match how most households actually spend. It understates what you need in your go-go years and leaves money unspent in your slow-go and no-go years, when you're less able to use it.
A tax-first withdrawal strategy can front-load spending into your active years without abandoning the years after. Drawing more from taxable and Roth accounts early, while tax-deferred accounts keep compounding, can fund a higher spending level now while preserving what you'll need later, including the RMDs still waiting for you at 73 or 75.
The goal isn't to maximize your account balance at death. It's to know the most you can safely spend while you're healthy enough to enjoy it, without running out later. That's a withdrawal order question as much as it's a spending question, and it's exactly what a tax-first plan is built to answer.
Common Questions
Retirement Withdrawal Strategy FAQ
Straight answers to the questions retirees ask most about withdrawal order, Social Security, and IRMAA.
- Generally, taxable accounts first, tax-deferred accounts second, and Roth accounts last. That sequence lets tax-deferred money keep compounding tax-deferred longer and holds tax-free Roth withdrawals in reserve for years your income already runs high. Required minimum distributions eventually force withdrawals from tax-deferred accounts starting at age 73, or 75 if you were born in 1960 or later, so that account type can't be avoided forever.
Next Step
Ready to Keep More of What You've Built?
If you and your spouse have $2M or more in investable assets, a tax-first retirement plan helps you keep more of it, year after year.
Areas Served
Serving Clients Nationwide, With Local Expertise Across Kansas City
Tax-first withdrawal plans get built for 401(k) and IRA millionaires across the country, based out of Overland Park, Kansas, with deep roots in Johnson County communities including Olathe, Lenexa, Leawood, Prairie Village, Shawnee, and Mission. If you're local to the Kansas City metro, find your community below.