The Retirement Account Withdrawal Order That Could Save You $100,000 or More in Taxes

Most retirees hold savings across three account types — taxable brokerage accounts, tax-deferred accounts like 401(k)s and traditional IRAs, and Roth accounts. Each is taxed differently, and the order you tap them determines how much of your money the IRS claims.

Here is the withdrawal order that allows you to keep more of your money, and why getting it wrong silently costs tens of thousands over a retirement lifetime.

Editor's note: Retirement account rules, tax thresholds, and RMD requirements are based on current IRS guidance and industry research available in 2026 unless otherwise stated.

How retirement accounts differ

Taxable brokerage accounts are funded with after-tax dollars, and investment gains are typically taxed at long-term capital gains rates of 0%, 15%, or 20%, depending on income.

Traditional IRAs and 401(k)s are tax-deferred, meaning withdrawals are taxed as ordinary income. Roth accounts are funded with after-tax contributions, grow tax-free, and generally provide tax-free withdrawals in retirement.

The conventional withdrawal order

The standard withdrawal sequence is taxable accounts first, tax-deferred accounts second, and Roth accounts last. Spending taxable assets first could lower early tax bills while allowing retirement accounts to continue growing. Roth accounts, which have no required minimum distributions (RMDs), remain valuable as a late-retirement and estate-planning reserve.

Vanguard's June 2026 modeling found this approach reduced lifetime taxes by roughly 14% by age 100 compared with proportional withdrawals.

Why the conventional order isn't always right

The conventional sequence is not a rigid rule. Mechanically following it might backfire if it leaves large traditional IRA and 401(k) balances untouched for years. Those balances keep growing, and so do the mandatory distributions that eventually come with them.

A retiree who avoids their traditional IRA for a decade could face RMDs in their 70s that push them into a higher bracket than they ever hit while working.

The most important tax planning window in retirement

The years between retirement and the start of RMDs are often the most valuable tax planning period in retirement. RMDs begin at age 73 for most retirees and at 75 for those born in 1960 or later under SECURE 2.0.

During this window, your income may be lower, creating an opportunity to make strategic IRA withdrawals or Roth conversions while taking advantage of lower tax brackets before RMDs increase taxable income.

Why deliberate over-withdrawal from tax-deferred accounts might pay off

During the gap years, it often makes sense to withdraw from traditional accounts beyond what you need for spending. The goal is to fill the 12% or 22% bracket intentionally, shrinking the balance that future RMDs will be calculated on.

A smaller traditional IRA balance at 73 means smaller mandatory distributions and more control over your tax picture in the years that follow.

The Roth conversion opportunity in the gap years

Roth conversions allow you to pay taxes at today's rates instead of potentially higher rates later. Following Vanguard's research, strategic Roth conversions during these years might reduce lifetime taxes by about 14% while also shrinking future RMDs.

For example, converting $50,000 at a 22% tax rate costs $11,000 today but could save $5,000 if later taxed at 32%.

The IRMAA risk that most withdrawal plans ignore

Large traditional IRA withdrawals might push your modified adjusted gross income (MAGI) above Medicare's IRMAA thresholds, triggering higher Part B and Part D premiums two years later.

In 2026, IRMAA begins at $109,000 for single filers and $218,000 for married couples. Roth withdrawals do not count toward MAGI, which makes them so valuable in years when traditional distributions would otherwise cross a threshold.

When taxable accounts aren't always first

While using taxable accounts first is a good starting point, it's not always the best option. If your portfolio holds highly appreciated investments, selling too much in one year could push you into the 20% capital gains bracket or trigger the 3.8% Net Investment Income Tax.

That tax applies to single filers above $200,000 and married couples above $250,000. A blended withdrawal approach may help lower your overall tax bill.

How withdrawal order affects your heirs

If leaving assets to heirs is in your plan, your withdrawal order might shape how much they keep. Traditional IRA inheritances generally must be emptied within 10 years, and each withdrawal is taxed as ordinary income.

Roth IRA inheritances follow the same 10-year rule, but withdrawals remain tax-free. Preserving Roth assets while using taxable and traditional accounts first could help reduce the tax burden your heirs may face.

A proportional strategy may sometimes work better

This means pulling funds from all your retirement accounts in the same ratio as their share of your total portfolio. According to Fidelity, spreading your withdrawals this way could extend portfolio longevity by nearly a full year.

For example, if your $1 million portfolio includes 40% in taxable accounts, 50% in traditional IRAs or 401(k)s, and 10% in Roth accounts, a $40,000 withdrawal would come from each account in the same ratio.

This strategy is personal and worth professional input

The best withdrawal strategy depends on your unique situation, including your account balances, Social Security timing, pension income, estate goals, and expected lifespan. A poorly timed withdrawal could trigger IRMAA surcharges, increase taxable Social Security, or push you into a higher tax bracket.

Because these decisions might have measurable financial consequences, working with a fee-only financial advisor may provide valuable guidance.

Bottom line

While the traditional strategy of taxable accounts first, tax-deferred accounts second, and Roth accounts last remains a strong starting point, the most effective plan often includes strategic IRA withdrawals and Roth conversions before RMDs begin. 

How well you've prepared for retirement also depends on how you manage taxes and income sources throughout your later years. A flexible plan may help you adapt to changing market conditions and the realities of retirement.