What the Average Retiree Gets Wrong About Withdrawal Order in 2026

If you were to retire today, you know the order in which you would start drawing from your accounts. But that default withdrawal order might quietly lock you into a tax pattern that becomes more expensive over time, especially once RMDs and Medicare rules enter the picture.

Here's where retirees go wrong by adopting the traditional withdrawal order in their retirement plan.

Editor's note: Tax rules and thresholds referenced are based on current 2026 IRS guidelines and may change.

The "standard" withdrawal order most people follow

Most retirees start with taxable brokerage accounts, then move to traditional 401(k)s or IRAs, and leave Roth accounts for last. The idea is to let tax-deferred money grow as long as possible.

It's a reasonable starting point, but it breaks down if you ignore your tax bracket each year. Over time, it could leave large balances that turn into heavy taxable income once required minimum distributions (RMDs) begin.

The dangerous mistake of leaving traditional IRAs untouched

Large traditional IRA or 401(k) balances create huge RMDs starting at age 73. Those forced withdrawals push you into higher tax brackets, make more of your Social Security taxable, and trigger IRMAA surcharges that raise Medicare Part B and D premiums by hundreds or thousands per year. You lose control over your own money.

How RMDs create a tax torpedo in your 70s

If you spend taxable and Roth accounts first while leaving your traditional IRA untouched, that balance keeps growing, and so does your future mandatory withdrawal. A $1.8 million balance at 65 could reach $2.4 million by 73.

Using the IRS factor of 26.5, that's about a $90,000 RMD, whether you need it or not. This pushes you into a higher tax bracket.

RMDs could trigger a Medicare surcharge you didn't expect

In 2026, Medicare IRMAA (Income-Related Monthly Adjustment Amount) kicks in above $109,000 modified adjusted gross income for singles or $218,000 for couples. Higher tiers add up to $487 per month extra for Part B and more for Part D.

According to Medicare, these surcharges are based on your income two years earlier, so one large RMD year could raise your premiums for two full years.

The Social Security tax trap

Up to 85% of Social Security becomes taxable once your "combined income" (adjusted gross income plus nontaxable interest plus half of Social Security) exceeds $34,000 for single filers or $44,000 for married filers.

For a couple in the 12% bracket, a large traditional IRA withdrawal could produce an effective marginal tax rate of 22.2% on that withdrawal.

Why Roth accounts shouldn't stay untouched forever

Treating Roth accounts as "last in line" feels safe, but it could be a missed opportunity. Since Roth withdrawals don't count toward taxable income, they may help you stay in lower tax brackets and avoid tipping into higher taxes or IRMAA surcharges.

They also give you flexibility for larger expenses like travel, healthcare, or home repairs without affecting your tax situation.

The early retirement window is your best planning tool

The years between retirement and the start of Social Security and RMDs, often called the "gap years", are usually your lowest-income period. With no paycheck and no required withdrawals yet, your taxable income is low.

That creates a rare planning window. You have more control over how much income you recognize, which makes it an ideal time to draw down traditional balances or do Roth conversions at lower tax rates.

When to break the traditional withdrawal sequence

Treat the withdrawal order as a tool for managing your tax bracket, not a fixed rule. In low-income years, pull more from traditional accounts or do Roth conversions. In high-income years, use taxable or Roth money instead.

Aim to keep your taxable income below key thresholds, such as the IRMAA cliff or the top of the 12% bracket, each year.

How to set an annual income target instead of following a fixed rule

Instead of thinking "taxable first, then traditional, then Roth," set a yearly taxable income ceiling based on your tax brackets. Start with Social Security, pensions, and required distributions, then fill the gap using whichever account keeps you within your target.

If a traditional withdrawal pushes you over a threshold, switch to Roth or taxable funds. In low-income years, draw from traditional accounts or convert strategically to reduce future RMD pressure.

Practical moves you could make right now

During the "gap years," use Roth conversions more actively. A $500,000 IRA at age 65 growing at 5% would reach $739,000 by age 73, creating an RMD of $27,900 using the 26.5 IRS factor.

If you're 70 and a half or older, consider Qualified Charitable Distributions (QCDs), which allow you to direct up to $111,000 in 2026 to satisfy required minimum distributions tax-free. Revisit your withdrawal plan annually as income and markets change.

Bottom line

Most retirees treat the withdrawal order as a simple fixed sequence instead of a flexible tool for managing tax brackets. Leaving traditional accounts untouched for too long puts you in a higher tax bracket.

After covering your income needs, you could start investing any surplus in diversified options like low-cost index funds, dividend-paying stocks, or bond funds within a taxable account. This lets you stay tax-efficient as your money grows.

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