Which account should you draw from first in retirement?

Ask which account to spend first in retirement and you'll usually hear the same thing. Taxable, then tax deferred, then Roth. Let the sheltered money grow as long as possible.

It's a defensible default. For a household with real assets, it's frequently the wrong order, and the cost compounds quietly for decades.

The short answer. The usual order optimizes for one thing: keeping money sheltered. But an untouched IRA keeps growing until the government forces withdrawals, as ordinary income, at an age when you can no longer do anything about it. The better question isn't which account to spend. It's how much income to deliberately recognize this year.

Why the conventional order is only a starting point.

The logic makes sense in isolation. Money in a brokerage account is taxed each year on dividends and gains anyway. Money in an IRA isn't taxed until it comes out. So spend the account already being taxed and leave the sheltered one alone.

What that misses is that the tax deferred balance doesn't sit quietly. It grows. And eventually you must withdraw from it whether you need the money or not, on top of Social Security, pensions, and everything else. Publication 590-B is where those required-withdrawal rules live.

The household that faithfully preserved its IRA for twenty years can find itself in a higher bracket at 80 than at 60, with no flexibility left to fix it.

The goal isn't to pay the least tax this year. It's to pay the least across the whole of your retirement, and across what passes to your family.

What the standard sequence misses.

Four things, generally.

The shape of your bracket over time. Most retirees pass through a window between the last paycheck and the first required withdrawal, where income is the lowest it's been in decades. That window is an asset. The conventional order leaves it unused.

What happens to the survivor. A couple filing jointly becomes a single filer at tighter brackets, usually carrying similar required income. A plan that works for two can strain for one.

The cost of the next dollar, not the average. Your bracket is rarely the whole story. How much of your Social Security is taxed, what Medicare charges you, the net investment income tax, and the rate on your capital gains all shift as income crosses certain lines. One extra dollar can cost several times what the bracket suggests.

What each account does for your children. Appreciated investments and tax deferred balances reach the next generation on very different terms. Spending the wrong one first can hand your family a materially worse inheritance for the same dollar amount.

Filling the low income years.

Once you see the window clearly, the question changes. It stops being "which account do I spend" and becomes "how much income should I deliberately recognize this year."

For many households the answer is more than zero. If your taxable income this year sits well below where it will sit once required withdrawals and Social Security are running, leaving that room empty isn't a saving. It's a decision to pay tax on those dollars later, probably at a higher rate.

Filling it can mean drawing from the IRA earlier than the usual order suggests. It can also mean converting part of it.

Roth conversions are the same question, asked on purpose.

A conversion is often discussed as a separate strategy. It's better understood as this decision made deliberately: recognize income now, at a rate you can see, rather than later, at a rate you can't. There's a fuller test in is a Roth conversion worth it for you, and it belongs inside the same tax plan as everything else.

That trade is attractive when your current rate is genuinely lower. It's unattractive when it isn't. And it can be actively harmful when the conversion pushes your income across a line that costs more than the bracket, which is the subject of the Medicare surcharge.

Nothing here sits on its own.

Withdrawal order looks like a tax decision. It's also an estate decision, an investment decision, and a Social Security decision, because each one changes what the others can do.

That's the whole argument for treating your wealth as one connected system rather than a set of accounts handled separately. It's what how we work is built around.

Where to start.

These sit inside the wider set of questions in you've saved enough, now what. Four of them get you most of the way to knowing whether your current sequence is serving you.

1. What will my taxable income be in the year required withdrawals begin, and how does it compare with this year?
2. If one of us were filing alone, at what rate would our required income be taxed?
3. Which of my accounts is growing fastest, and is that the one I want to be largest in fifteen years?
4. Which assets do I intend to leave, and on what terms would each of them pass?

None of these require a market forecast. They require a clear view of your own balance sheet, a real figure for what you actually spend, and the law as it stands.

That's work you can do, and it's worth doing before the flexible years are behind you. If you'd like to see it against your own numbers, let's talk.