Retirement Withdrawal Strategies: Sequencing Your Income Sources
Explore general approaches to drawing down savings, pensions, and Social Security in an order that may help extend financial longevity.
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—— In This Article
Key Takeaways
- Drawing from taxable accounts first can allow tax-advantaged savings more time to grow.
- Delaying Social Security benefits, when feasible, increases your monthly payment permanently.
- Required Minimum Distributions from traditional IRAs begin at age 73 and cannot be deferred.
- Coordinating account types and income sources can affect your tax bracket each year.
- No single sequence works for every household; a licensed financial adviser can tailor a plan.
Why the order of withdrawals matters
Retirement income rarely comes from a single source. Most retirees draw from some combination of Social Security, traditional IRAs or 401(k)s, Roth accounts, and taxable brokerage or savings accounts. Each of these carries different tax treatment, and the order in which you tap them can affect how long your money lasts and how much you owe the IRS each year.
A poorly ordered withdrawal plan can push you into a higher tax bracket, trigger Medicare premium surcharges, or exhaust accounts that would have benefited from continued growth. Thinking through sequencing before you retire, rather than during, gives you more options. For a broader view of why this planning window matters, see the financial preparation checklist for the decade before retirement.
Map every income source and its tax treatment before you begin withdrawals
Social Security, traditional IRA distributions, Roth withdrawals, and capital gains are each taxed differently. Without a clear picture of all sources, it is easy to accidentally spike your taxable income and move into a higher bracket.
Draw from taxable accounts early to preserve tax-advantaged growth
Money in traditional IRAs and Roth accounts grows without annual taxes on gains. Spending down taxable brokerage funds first lets those sheltered balances compound longer, which can matter over a 20- or 30-year retirement.
Use lower-income years for Roth conversions
Converting traditional IRA funds to a Roth in years when your income is low means paying the conversion tax at a lower marginal rate. Later RMDs from a smaller traditional IRA are then smaller, reducing the risk of a tax spike.
Plan around Required Minimum Distribution start dates
RMDs from traditional IRAs and most employer plans are mandatory starting at age 73 and are calculated on your total balance. Large RMDs added to Social Security can push combined income above Medicare premium thresholds.
Revisit your withdrawal plan annually
Tax laws, account balances, spending needs, and health all change. A sequence that made sense at retirement may be inefficient or unsustainable five years later. Inflation alone can shift how far each dollar goes.
Common sequencing approaches
Financial planning literature describes several general frameworks for ordering withdrawals. These are starting points for discussion, not prescriptions for any individual situation.
Taxable accounts first
One widely discussed approach draws from taxable brokerage or savings accounts before touching tax-advantaged retirement accounts. Gains in taxable accounts are subject to capital gains tax regardless, and leaving traditional IRA or 401(k) balances untouched allows them to continue growing tax-deferred. Roth accounts, which grow tax-free, are often left for last under this model.
Tax bracket management
Some retirees benefit from a blended approach: deliberately pulling from multiple account types each year to keep taxable income within a specific bracket. For example, a retiree might take a portion from a traditional IRA and supplement with Roth withdrawals to avoid crossing into the next bracket. This requires projecting income carefully and reviewing it annually, since income sources such as Social Security become partially taxable once combined income crosses certain thresholds.
Roth conversions before Required Minimum Distributions
If you have a traditional IRA and retire before age 73, the years between retirement and when Required Minimum Distributions (RMDs) begin can be an opportunity to convert portions of traditional IRA balances to Roth. Converting in lower-income years may mean paying tax at a lower rate now rather than a higher rate later when RMDs are mandatory. The IRS sets RMD rules, and the current starting age is 73 under the SECURE 2.0 Act. Failing to take an RMD carries a significant penalty, so these distributions are not optional once they begin.
“The sequence in which you withdraw money from different accounts can be just as important as how much you have saved. Tax efficiency over a 30-year retirement is not a minor detail.”
— William Bernstein, Author and investment theorist, known for writing on retirement portfolio management
Social Security timing and its role in sequencing
Social Security is the one income source in most retirees' plans that grows the longer you wait (up to age 70). Each year you delay past full retirement age, your monthly benefit increases by roughly 8 percent, according to the Social Security Administration. Delaying means drawing more heavily from savings in early retirement years, which requires having enough liquid assets to bridge that period without stress.
Whether delaying makes sense depends on health, other income, and whether you have a surviving spouse who would inherit a higher benefit. This is a decision with long-term consequences and is worth reviewing with a licensed financial adviser. Understanding longevity risk is part of that picture: a longer life expectancy generally favors delaying Social Security.
8%
Annual increase for delaying Social Security past full retirement age
According to the Social Security Administration, benefits grow approximately 8 percent per year for each year of delay between full retirement age and age 70.
Age 73
Age at which Required Minimum Distributions must begin
Under the SECURE 2.0 Act signed into law in 2022, the RMD starting age for most tax-deferred retirement accounts is 73.
20-30 years
Typical length of a retirement income period
The Society of Actuaries' research on retirement longevity suggests many retirees should plan for income needs spanning two to three decades or more.
Practical steps to get started
Before choosing a sequence, take stock of every income source you will have: Social Security estimates (available at ssa.gov), pension income if applicable, account balances by type, and any rental or part-time income. Map out your expected annual spending. The budgeting after 60 guide offers a framework for translating that into a monthly figure.
Inflation will erode purchasing power over a multi-decade retirement, so a plan that works at 65 may need adjustment at 75. Revisiting your withdrawal rate and tax situation annually, and after any major change in income or expenses, is standard practice. If your savings are leaner, the approach described in building an emergency fund on a fixed income addresses how to maintain a cushion alongside regular withdrawals.
This article is for general informational purposes only and does not constitute personalized financial, tax, or legal advice. Retirement planning involves individual circumstances that vary widely. Consult a qualified, licensed financial adviser, tax professional, or attorney before making decisions about your own retirement income strategy.
Finance Editorial Team
Finance Editorial Team is the collective byline for our editorial team and contributor network. Articles published under this byline or an editorial pen name are researched, written, and reviewed according to our editorial standards for clarity, consistency, and independence before publication.
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