For most working Americans, accumulating retirement savings is the primary financial focus for decades. But the moment retirement begins, the challenge shifts, and it shifts dramatically. The question is no longer how much to save, but how to turn what you have saved into reliable, tax-efficient income that lasts as long as you need it to.
The order in which you draw from different types of accounts, including taxable brokerage accounts, tax-deferred accounts like traditional IRAs and 401(k)s, and tax-exempt accounts like Roth IRAs, has a meaningful and lasting impact on your tax bills, your Medicare premiums, and ultimately how long your portfolio lasts. Research from T. Rowe Price found that retirees who tailored their withdrawal strategy rather than following a conventional account-depletion approach saved $35,000 or more in federal taxes, and in some modeled cases left $106,000 more to heirs.¹
The Conventional Approach — and Its Hidden Cost
The traditional guidance on retirement withdrawals goes roughly like this: spend down taxable accounts first, then tax-deferred accounts, then preserve Roth assets for last. The logic is intuitive — let tax-advantaged money compound as long as possible.
The problem is that this approach, applied without flexibility, can create a significant tax problem later. If a large traditional IRA or 401(k) balance sits untouched during the early years of retirement while taxable accounts are depleted, that balance continues to grow. By the time Required Minimum Distributions begin at age 73, the account may be substantially larger than it was at retirement, producing mandatory withdrawals that push taxable income into higher brackets, increase Social Security taxation, and trigger IRMAA Medicare premium surcharges.² The issue is not the RMD itself. The issue is the compounding effect of postponing withdrawals too long.
The Pre-RMD Planning Window
For retirees who are no longer earning income but have not yet begun Social Security or RMDs, there is often a stretch of years, sometimes a decade or more, during which taxable income is unusually low. This window is one of the most valuable in all of retirement planning, and it is frequently underused.³
During this period, intentionally drawing from tax-deferred accounts or executing Roth conversions at favorable tax rates can meaningfully reduce future RMD pressure. Paying modest taxes today on controlled withdrawals or conversions is often far less costly than facing large, mandatory distributions later at higher rates. As Morningstar’s Director of Personal Finance Christine Benz has noted, the pre-Social Security, pre-RMD years are often the best opportunity retirees will have to reposition assets at an advantageous tax rate.⁴
A Framework for Smarter Sequencing
Rather than following a rigid account-depletion order, a more effective approach coordinates withdrawals across all three account types each year based on current circumstances, from bracket position, spending needs, and projected RMDs to charitable intent. A general framework:
Taxable accounts are drawn first for high-basis assets and tax-efficient holdings. Tax-deferred accounts are tapped strategically to fill lower income tax brackets, manage RMD projections, and fund spending needs before Social Security begins. Roth accounts are preserved for late-retirement flexibility, large one-time expenses, and as assets for heirs, since inherited Roth accounts remain tax-free for beneficiaries.⁵
This is not a set-it-and-forget-it plan. The right withdrawal mix changes each year as income sources, tax brackets, account balances, and spending needs evolve. The annual review process is where much of the value is created.
Social Security Timing and the Income Stack
One of the most consequential decisions in retirement income planning is when to begin Social Security. Delaying beyond full retirement age increases the monthly benefit by approximately 8% per year through age 70: a guaranteed, inflation-adjusted return that is difficult to replicate elsewhere.⁶ But the decision is not made in isolation. Delaying Social Security means funding early retirement years from savings, which affects how much is drawn from which accounts and in what sequence. Coordinating Social Security timing with withdrawal strategy and Roth conversion planning is exactly the kind of integrated analysis that benefits from working with a financial advisor.
Bottom Line: The difference between a coordinated retirement income strategy and a conventional one can amount to tens of thousands of dollars over the course of retirement — not from taking more risk, but from drawing income more deliberately. If you have not recently reviewed the sequencing of your withdrawals, this is a valuable conversation to have with your Wedbush advisor before year-end RMD and tax planning decisions arrive.
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