The retirement withdrawal order, meaning which accounts you draw from first, is one of the most consequential ongoing decisions in retirement. Most people give it far less thought than they gave to accumulating the money in the first place. The conventional advice suggests spending taxable accounts first, then pre-tax retirement accounts, then Roth last. That sequence has a logic to it, but for most high-net-worth retirees, following it mechanically without modeling the full picture can result in unnecessarily higher taxes over a retirement that lasts 25 or 30 years.
The right answer depends on your tax bracket, your Social Security timing, when Required Minimum Distributions begin, your Medicare premiums, your spending needs, and what you want to leave behind. All of those variables move simultaneously and interact with each other. Getting it right requires modeling the full picture, not applying a rule of thumb.
Why Retirement Withdrawal Order Matters More Than Most People Realize
Every dollar you withdraw from a retirement account has a tax consequence, and those consequences compound across decades in ways that are easy to underestimate.
A dollar withdrawn from a Traditional IRA is taxed as ordinary income at your marginal federal and state rate. A dollar withdrawn from a taxable brokerage account may be taxed at the long-term capital gains rate, which is lower for most retirees, or may have no tax consequence at all if it represents a return of cost basis. A dollar withdrawn from a Roth IRA is generally tax-free entirely.
Those are three very different outcomes from spending the same dollar, and the sequence in which you access them affects your marginal tax rate, how much of your Social Security is taxable, your Medicare IRMAA premiums, your future RMD obligations, and ultimately how much of your wealth you keep versus how much goes to taxes.
A poorly sequenced withdrawal in year two creates a slightly smaller portfolio that generates slightly less growth, which means slightly less flexibility in year ten. Over a long retirement the cumulative difference is anything but small.
The Four Account Types and Their Tax Characteristics
Before any sequencing strategy makes sense, you need to understand what each type of account actually costs you when you spend it.
Taxable brokerage accounts. Money in a taxable account has already been taxed when it was earned. When you sell investments, you owe tax only on the gains above your cost basis. Long-term capital gains rates for 2026 are 0%, 15%, or 20% depending on taxable income, plus the 3.8% Net Investment Income Tax for higher earners. For retirees with modest income, a meaningful portion of their gains may be taxed at 0%. The other advantage of taxable accounts is flexibility: no withdrawal rules, no penalties, no required distributions, and no age restrictions.
Traditional IRAs and pre-tax 401(k)s. Every dollar you withdraw from a pre-tax retirement account is taxed as ordinary income in the year you take it. That includes the original contributions and all the growth. There’s no distinction between capital gains and ordinary income inside a pre-tax IRA. At 73, the IRS requires minimum distributions from these accounts regardless of whether you need the money. Those forced withdrawals can stack on top of other income and create a tax burden that’s difficult to manage after the fact.
Roth IRAs. Roth accounts were funded with after-tax dollars. Qualified withdrawals are entirely tax-free, and there are no lifetime Required Minimum Distributions for the original account owner. Roth money is the most tax-efficient asset you can pass to heirs and the most valuable source of income during high-income years in retirement when every additional dollar of ordinary income is expensive.
Health Savings Accounts. An HSA is the only triple-tax-advantaged account in existence. Contributions went in pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. For retirees, an HSA balance used for healthcare costs is essentially free money from a tax standpoint. At 65, HSA funds can also be withdrawn for any purpose and are simply taxed as ordinary income, making them function like a Traditional IRA for non-medical spending.
The Conventional Wisdom and Why It’s Incomplete
The standard advice is to spend taxable accounts first, let the tax-advantaged accounts continue growing, and preserve Roth accounts for last since they carry no RMDs and provide tax-free income.
This sequence has real merit. Deferring tax on IRA growth extends the compounding. Preserving Roth accounts means more tax-free flexibility later. And using taxable accounts first avoids triggering ordinary income during years when you might be in a lower bracket.
The problem is that it’s incomplete. It ignores the RMD problem entirely. If you spend your taxable account first while leaving your Traditional IRA untouched for a decade, that IRA is compounding the entire time. By 73, it may be worth considerably more than when you retired. The RMDs generated by a larger IRA push you into higher brackets, increase Medicare premiums, and cause more of your Social Security to be taxable. The conventional strategy optimizes for the next few years without considering what it does to your tax picture in years fifteen through thirty.
Deferring taxes as long as possible and paying the least total tax across your lifetime are two different goals, and they often lead to different decisions.
The Case for Drawing From the IRA Earlier Than You Think
One of the most counterintuitive insights in retirement income planning is that drawing from a Traditional IRA earlier than you need to, in the years before RMDs begin, can meaningfully reduce your lifetime tax burden.
In early retirement, before Social Security begins and before RMDs begin, many retirees have their lowest taxable income of the post-retirement period. If you have always been a high earner, you may never again be in a 22% or 24% federal bracket once both Social Security and RMDs are stacking on each other. Taking modest IRA withdrawals during those low-income years, either for spending or as part of a Roth conversion, uses those brackets intentionally.
Done strategically, this reduces the IRA balance that will be subject to RMDs at 73, which reduces the magnitude of those forced distributions, which reduces taxes in your 70s and 80s, which reduces the widow’s penalty when one spouse dies, and which reduces the tax burden on heirs who inherit what’s left. Coordinating withdrawal order with Roth conversions isn’t two separate decisions. They’re one decision, and they need to be modeled together.
A Concrete Example With Real Numbers
Consider a married couple, both age 62, who retire with the following portfolio: $3 million in a taxable brokerage account, $3 million in Traditional IRAs, and $500,000 in Roth IRAs. Their annual spending is $200,000, Social Security is planned for age 70 with a combined benefit of $80,000 per year, and they have no earned income.
The conventional approach. From age 62 to 70, they spend from the taxable account. Their taxable income in these years is modest: dividends and capital gains from the brokerage, perhaps $60,000 to $80,000 per year. Federal income tax is low. Meanwhile, the $3 million Traditional IRA grows untouched at 6% annually and reaches approximately $4.8 million by 70. At 73, with Social Security adding $80,000 per year and the IRA growing further to around $5.4 million, the first-year RMD is roughly $204,000. Combined with Social Security and investment income, taxable income approaches $300,000 or more. The couple is in the 32% federal bracket for a meaningful portion of their income, plus Colorado’s 4.4%. Medicare IRMAA surcharges add several hundred dollars per month. The tax bill is substantial and growing every year.
The strategic approach. From age 62 to 70, the couple draws primarily from the taxable account for spending but also takes $100,000 to $150,000 per year from the Traditional IRA, either as withdrawals or Roth conversions, during the years when their bracket is most favorable. They pay tax on those amounts at 22% to 24% while their income is low.
By 70, the Traditional IRA is roughly $2.2 million rather than $4.8 million, the difference representing eight years of conversions and withdrawals taxed at manageable rates. The Roth account has grown substantially. At 73, the first-year RMD from the smaller IRA is approximately $83,000, a fraction of what it would have been. Combined with Social Security, their taxable income is far more manageable. Medicare premiums are lower. The marginal bracket on additional spending is lower. And the surviving spouse, who will eventually file as a single taxpayer, faces a far less severe tax burden.
The total lifetime tax paid under the strategic approach is almost certainly lower, even though they paid more tax in the early years of retirement. The difference compounds across decades.
Social Security Changes the Calculation
When Social Security begins, the income picture changes in ways that affect the optimal withdrawal order. Up to 85% of Social Security benefits can be included in taxable income depending on combined income. This creates an effective marginal tax increase on each dollar of additional income during years when Social Security is partially in the taxable range. A retiree in the 22% bracket who adds IRA income may find that the effective marginal rate on that income is higher because each dollar of IRA income makes more of the Social Security benefit taxable.
This is one reason the years before Social Security begins are often the most efficient for IRA withdrawals and Roth conversions. Once Social Security starts, the lower brackets are partially occupied by those benefits, which reduces the room available for tax-efficient IRA withdrawals. Coordinating Social Security timing with the withdrawal order strategy is one of the most powerful combined planning decisions in retirement.
The IRMAA Threshold Problem
Medicare IRMAA surcharges function as soft ceilings in the withdrawal order decision. Because Medicare uses income from two years prior, every income decision you make today affects Medicare premiums two years from now.
For 2026, the first IRMAA threshold for married couples filing jointly is $218,000 of modified adjusted gross income. The tiers escalate from there at $274,000, $342,000, $410,000, and $750,000. Each tier adds a meaningful amount to monthly Medicare Part B and Part D premiums. In practice, this means that a retiree who can keep income below an IRMAA tier boundary through careful sequencing of account withdrawals saves not just on taxes but on Medicare premiums as well.
IRMAA thresholds don’t mean you should never cross them. If a large Roth conversion produces long-term tax savings that exceed two years of elevated Medicare premiums, it may still be the right choice. But the thresholds need to be part of the calculation, not discovered after the fact.
When the Roth Account Should Be Spent
Roth accounts are not simply something to preserve forever. There are specific circumstances where drawing from the Roth is the right move even in early retirement.
If you’re in a high-income year, whether from a large capital gain, a Roth conversion that pushes you near a bracket ceiling, or any other income spike, the Roth is the right place to draw additional spending money. It doesn’t add to taxable income. It doesn’t push Social Security further into taxable territory. It doesn’t trigger IRMAA.
If you face a healthcare emergency or large unexpected expense and you’re near the top of a bracket, the Roth absorbs that cost without tax consequence. A sudden need for $50,000 from a Traditional IRA in an otherwise high-income year can be expensive. The same $50,000 from a Roth costs nothing in additional taxes.
The Roth is also the right account to draw from when one spouse has died and the survivor is filing single, in years where any additional taxable income would be particularly costly. The single-filer brackets are narrower, IRMAA thresholds are lower, and the tax cost of ordinary income is higher. Having Roth money available in those years is valuable precisely because it doesn’t add to the problem.
The HSA as the Final Tax-Efficient Layer
For retirees who accumulated an HSA balance, the account deserves specific attention in the withdrawal strategy. HSA withdrawals for qualified medical expenses are tax-free at any age, and medical expenses tend to increase with age, which means the HSA often becomes more useful, not less, as retirement progresses.
A retiree with a meaningful HSA balance should generally preserve it for healthcare costs, since every dollar used for qualified medical expenses is effectively tax-free income. This is particularly valuable in high-income years when ordinary income is expensive, because replacing taxable IRA withdrawals with tax-free HSA distributions for healthcare costs can meaningfully reduce the tax bill. Keeping receipts for medical expenses paid out of pocket in early retirement and reimbursing yourself from the HSA years later is a legitimate strategy. There’s no time limit on reimbursement as long as the expenses occurred after the HSA was established.
The Surviving Spouse Changes Everything
The withdrawal order strategy that’s optimal for a married couple isn’t the same strategy that will be optimal after one spouse dies. Planning for this transition in advance is one of the most important and most overlooked aspects of retirement income planning.
When one spouse dies, the survivor’s filing status shifts to single, the bracket structure narrows, and IRMAA thresholds drop. The same income that fit comfortably within the married filing jointly framework can push the survivor into materially higher rates. If the couple has spent the taxable account and done few Roth conversions during the married years, the surviving spouse may face large RMDs on a sizeable Traditional IRA, forced ordinary income at single-filer rates, and limited flexibility to manage the tax picture.
Roth conversions done during the married years are the primary tool for reducing this risk, which is why the withdrawal order strategy and the conversion strategy are inseparable. A complete retirement income plan models the survivor scenario explicitly, not just the joint scenario. We cover this in depth in our article on the widow’s financial penalty.
Why This Requires More Than a Spreadsheet
Withdrawal order planning sounds manageable when described at the level of principles. The execution is considerably more complex, because all the variables move simultaneously and the decisions interact across decades.
The optimal withdrawal order in year one depends on projections about Social Security timing, RMD growth, expected investment returns, bracket changes from pending tax law expiration, IRMAA tier positions, the health and longevity of both spouses, charitable intentions, and estate goals. Change any of those inputs and the answer changes. The analysis also needs to be updated every year, because income, account balances, tax law, and personal circumstances all shift.
At Inclinevest, we use Right Capital, a professional retirement income planning platform, to model withdrawal sequences across the full planning horizon. This lets us see the tax picture year by year, model Roth conversions alongside withdrawal sequencing, run survivor scenarios, and identify the years where the sequencing decision is most impactful. For the tax projections specifically, we coordinate with a tax professional using dedicated tax software rather than AI-generated estimates, because the interactions between ordinary income, capital gains, Social Security taxability, IRMAA, and state taxes require precise calculation rather than approximation.
Withdrawal order planning is a prime example of a decision where complexity genuinely justifies professional involvement. The principles are accessible. The execution, done correctly across a 25 to 30 year retirement, requires the kind of modeling that isn’t available through consumer-facing tools. The stakes, measured in total lifetime taxes across multiple tax systems, Medicare premiums across decades, and the financial wellbeing of a surviving spouse, are too high to get wrong.
How We Approach This at Inclinevest
Withdrawal order strategy is one of the first things we work through with every retirement planning client at Inclinevest. We model the full income picture year by year, including investment income from the taxable account, projected Roth conversions, Social Security timing, RMD growth, IRMAA thresholds, and spending needs. We then identify the years where sequencing decisions matter most and build a plan that’s updated annually as circumstances change.
Gabriel Motta, CFP®, is a Certified Financial Planner and retirement financial advisor in Greenwood Village, Colorado, working with pre-retirees and retirees in the five to fifteen years before and after retirement, when withdrawal sequencing decisions have the most lasting impact. If you have multiple account types and haven’t worked through a coordinated withdrawal strategy, that conversation is worth having well before the first RMD arrives. We’d be glad to start that conversation. You can also review our services and fees.
Frequently Asked Questions
Should I spend my taxable account or my IRA first in retirement? It depends on your tax bracket, your RMD projections, your Social Security timing, and your overall income picture. The conventional advice to spend taxable first has merit but ignores the RMD problem. For many high-net-worth retirees, drawing from the IRA strategically in early retirement, either for spending or Roth conversions, produces better long-term outcomes than leaving it untouched until RMDs begin.
When should I spend from my Roth IRA? The Roth is most valuable in high-income years when any additional taxable income is expensive, in years where IRMAA thresholds would be triggered by IRA withdrawals, after one spouse dies when single-filer brackets are narrower, and as a legacy asset for high-income heirs who would otherwise pay significant taxes on inherited Traditional IRA distributions.
Does withdrawal order affect Medicare premiums? Yes. Medicare uses income from two years prior to determine IRMAA surcharges on Part B and Part D premiums. Account withdrawals that increase modified adjusted gross income can trigger or escalate IRMAA, effectively adding to the cost of income in ways that don’t show up on the federal tax return directly.
How does Social Security affect which account I should draw from? Social Security is partially taxable depending on combined income, and large IRA withdrawals in the same year Social Security is received can push more of the benefit into taxable territory. This is one reason the years before Social Security begins are often the most efficient for IRA withdrawals and Roth conversions.
What happens to the withdrawal order when one spouse dies? The surviving spouse’s filing status changes to single, which narrows the tax brackets, lowers IRMAA thresholds, and makes ordinary income from IRA withdrawals more expensive. Roth conversions and taxable account assets built during the married years become more valuable because they don’t add to the tax burden. The withdrawal order strategy should be re-evaluated in the context of the survivor scenario, not just the joint scenario.
Should I take RMDs and then also do Roth conversions? You must satisfy the RMD first, and the RMD itself can’t be converted to a Roth. Additional amounts beyond the RMD can be converted, but the combined taxable income from the RMD plus the conversion needs to be evaluated carefully against brackets and IRMAA thresholds.
Is there a simple rule for which account to withdraw from first? No. The right answer depends on your specific income, tax situation, account mix, Social Security timing, state taxes, IRMAA exposure, estate goals, and the health and longevity of both spouses. Rules of thumb can point you in a direction, but the actual withdrawal order should be modeled year by year rather than set and forgotten.
Key Takeaways
- The order you withdraw from retirement accounts directly affects your taxes, Medicare premiums, how much of your Social Security is taxable, and how long your money lasts.
- The conventional sequence of taxable first, then traditional IRA, then Roth ignores the RMD problem. Leaving a large Traditional IRA untouched for a decade while it compounds can create a much heavier tax burden when forced distributions begin at 73.
- Drawing from Traditional IRAs or doing Roth conversions during low-income years in early retirement, even when the money isn’t needed for spending, can significantly reduce lifetime taxes by managing the size of future RMDs.
- Social Security timing, IRMAA thresholds, capital gains rates in the taxable account, and state taxes all interact with the withdrawal order decision and need to be modeled together rather than separately.
- The Roth account is most valuable as a tax-free resource in high-income years, when one spouse has died and the survivor is filing single, and as an inheritance for high-income heirs.
- HSA balances used for healthcare expenses are effectively tax-free income and should generally be preserved for medical costs rather than general spending.
- The survivor scenario requires a different withdrawal strategy than the joint scenario. Roth conversions and taxable assets built during the married filing jointly years directly reduce the tax burden the surviving spouse faces alone.
- Withdrawal order planning requires year-by-year modeling of complex interacting variables and should be updated annually as income, tax law, and circumstances change.
About the Author
Gabriel Motta, CFP®, MBA, is the founder and principal of Inclinevest LLC, a fee-only fiduciary retirement financial advisor and financial planner based in Greenwood Village, Colorado. He works with pre-retirees and retirees throughout south Denver, across Colorado, and nationally, including clients in Highlands Ranch, Centennial, Lone Tree, Aurora, Parker, Castle Rock, and Littleton. As a retirement planner and wealth manager, Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more at inclinevest.com or schedule a conversation.
Sources
- IRS, “Retirement Topics: Required Minimum Distributions” — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- IRS, “Topic No. 409: Capital Gains and Losses” — https://www.irs.gov/taxtopics/tc409
- IRS, “Publication 590-B: Distributions from Individual Retirement Arrangements” — https://www.irs.gov/pub/irs-pdf/p590b.pdf
- IRS, “Health Savings Accounts and Other Tax-Favored Health Plans” — https://www.irs.gov/pub/irs-pdf/p969.pdf
- SSA, “Income Taxes and Your Social Security Benefits” — https://www.ssa.gov/benefits/retirement/planner/taxes.html
- CMS, “2026 Medicare Parts B Premiums and Deductibles” — https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
- IRS, “2026 Tax Rate Schedules and Inflation Adjustments” — https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2026
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Tax rates, brackets, Medicare premiums, and retirement account rules reflect current law and are subject to change. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
