Best Withdrawal Sequence For Retirement Accounts

If you’re retired (or nearing retirement), you may have money spread across a Traditional IRA/401(k), a Roth IRA/401(k), and a taxable brokerage account. A common question from newer retirees is: “Which account should I pull from first?”

The Old Rule of Thumb for Retirement Withdrawal Sequence

1️⃣ Spend your taxable brokerage money first;

2️⃣ Then draw from your Traditional IRA;

3️⃣ Save the Roth IRA for last (to maximize tax-free growth)

On paper, that makes sense — let your Roth account compound for as long as possible. But in practice? It can backfire. That “old-school” strategy often results in very low taxes in the early years, followed by much higher taxes later once you start tapping your Traditional IRA… and then potentially no taxes at the very end when you’re left with just the Roth.

So what is a better solution?

A Smarter, More Modern Approach

1️⃣ Start by using the investment income (interest, dividends, capital gains distributions) from your taxable accounts — you’ll be taxed on those anyway.

2️⃣ If you’re subject to Required Minimum Distributions (RMDs) from your IRA/401(k), take those next.  And if you give to charity, consider Qualified Charitable Distributions (QCDs) before taking your RMDs (see my post “Roth Conversions — Not the Best Solution for Many Households” for more insights on this topic).

3️⃣ After that, research increasingly supports a blended withdrawal strategy — taking proportionate amounts each year from your taxable, Traditional IRA/401(k), and Roth IRA/401(k) accounts.  Note: if you take RMDs, those would come from the Traditional IRA/401(k) portion of the blended mix.  

This approach smooths out your tax bill across retirement, helping you:

✅ Pay lower total lifetime taxes

✅ Avoid sudden tax spikes

✅ Minimize the risk of IRMAA surcharges or the 3.8% Medicare Net Investment Income Tax (NIIT)

Pro Tip for Big Expenses

Planning a major purchase — like a new car, a home renovation, or a dream vacation? Consider drawing from your taxable brokerage account (especially if you qualify for 0% capital gains) or your Roth IRA/401(k) (which is tax-free).  If possible, avoid large, one-time withdrawals from your Traditional IRA/401(k), as those can quickly push you into higher ordinary tax brackets and trigger IRMAA surcharges as well as the 3.8% NIIT.

Retirement success isn’t just about saving money — it’s also about taking it out wisely. Getting the withdrawal sequence right can save you hundreds of thousands of dollars over a 30-year retirement.

If you would like friendly, expert assistance in planning your retirement withdrawal strategy, please contact me or visit www.flourishingpathfinancial.com/book-online to schedule a free Discovery Session.

Author:  John Macy, MBA, RICP®

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