Which Account Do You Draw From First in Retirement? The Withdrawal Order That Lowers Lifetime Tax

Key takeaways

The goal is the lowest lifetime tax, not the lowest tax this year.
Spending only from taxable accounts early usually wastes the low brackets and builds a larger RMD problem later.
Most retirees do best blending sources each year to fill a target bracket, with Roth kept as the flexible reserve.
Social Security timing, IRMAA, and the 10-year rule for heirs all change the answer.

Ask ten retirees where their monthly spending comes from and most will give you the same answer: the brokerage account first, the IRA when that runs out, and the Roth last. It's the order in every beginner's guide, and it has a certain logic to it. Let the tax-deferred money keep growing. Touch the tax-free money never.

The problem is it optimizes the wrong thing. It minimizes tax in the early years and often maximizes it across the whole retirement, because it leaves the low brackets empty in the years you could have used them and then hands you a large required distribution problem in your seventies. Sequencing withdrawals well isn't really about a fixed order. It's about a target, set fresh every year.

The three kinds of money

Every retirement account falls into one of three tax buckets.

Taxable accounts (brokerage, savings): you already paid tax on the principal; you owe tax only on interest, dividends, and realized gains, and long-term gains get preferential rates.
Tax-deferred accounts (traditional IRA, 401(k), 403(b)): every dollar out is ordinary income, and the IRS forces withdrawals starting at age 73 (75 for anyone born in 1960 or later).
Tax-free accounts (Roth IRA, Roth 401(k), HSA used for medical expenses): withdrawals cost nothing, and a Roth IRA has no lifetime required distributions.

Each dollar of spending can come from any of the three, and the choice changes the tax bill this year and the size of the bills later. That's the whole game.

Why "taxable first" backfires

Picture a couple who retire at 62 with $600,000 in a brokerage account, $1.8 million in traditional IRAs, and $200,000 in a Roth. They spend $120,000 a year. Following the textbook, they live on the brokerage account for about five years while the IRAs keep compounding. Their taxable income in those years is tiny: some dividends and gains, minus a $32,200 standard deduction. They pay almost no tax and feel pretty good about it.

At 70 they claim Social Security. At 73 the IRAs, now maybe $2.6 million, start required distributions of roughly $100,000 a year and rising. Stacked on Social Security, that shoves them firmly into the 24% bracket, makes 85% of their Social Security taxable, and lands them in a Medicare IRMAA tier they never needed to touch. And the 12% and 22% brackets they left empty from 62 to 70? Gone. You don't get those back.

The alternative is to fill those brackets on purpose: draw some IRA money (or convert some to Roth) every year from 62 onward, up to the top of the 12% or 22% bracket, and cover the rest of spending from the brokerage account. The early-year tax bills are higher. The lifetime tax bill is lower, sometimes by six figures.

The bracket-filling approach

This is the method we use. Not a fixed order, a yearly target.

Set a target bracket for the year, usually the 12% or 22% bracket depending on how big the tax-deferred balance is and what rate you expect later. In 2026 the 12% bracket for joint filers ends at $100,800 of taxable income and the 22% bracket at $211,400.
Count the income that shows up whether you want it or not: pensions, Social Security once it starts, interest, dividends, and required distributions once they begin.
Fill the remaining room in the target bracket with traditional IRA withdrawals or Roth conversions. Withdrawals cover spending; conversions move the excess into the Roth for later.
Cover the rest of spending from the taxable account, harvesting gains in the 0% capital gains range when you can (up to $98,900 of taxable income for joint filers in 2026).
Keep the Roth as the reserve for large one-time expenses, for years when a big withdrawal would jump a bracket or an IRMAA tier, and for whatever ends up going to heirs.

Run this every year and the tax-deferred balance shrinks in an orderly way before RMDs arrive, the taxable account lasts longer than it would have, and the Roth ends up as the last money standing. Which is exactly where you want the tax-free dollars to be.

The variables that change the answer

Social Security timing. Delaying benefits to 70 raises the monthly check by 8% a year past full retirement age, and it opens a wider low-income window for IRA withdrawals and conversions before the benefit starts. The two decisions belong together; our guide to when to claim covers the math.

Medicare premiums. From age 63 on, every year's income sets your Medicare premium two years later. The 2026 IRMAA thresholds start at $218,000 of modified AGI for joint filers. Once you're within reach of Medicare, the bracket target often turns into an IRMAA target instead.

Heirs. Children who inherit a traditional IRA must generally empty it within ten years, at their own tax rates, often while they're still working. Drawing the IRA down during your lower-bracket years, or converting it, shifts that tax from their bracket to yours. Children who inherit a Roth get ten years of tax-free growth and no income tax at all.

A surviving spouse. When one spouse dies, the survivor files as a single taxpayer the following year. The brackets roughly halve. The income often doesn't. Couples with large IRAs should plan for the survivor's rates, which argues for more withdrawals and conversions while both are alive.

Charitable giving. After 70½, qualified charitable distributions send IRA money straight to charity without it ever showing up as income. For retirees who give, the IRA becomes the giving account and the withdrawal plan changes accordingly.

State residency. Florida retirees pay no state income tax on any of this. Anyone planning a move here should push the large withdrawals to after the move.

What this looks like in practice

For our clients, the withdrawal plan is a single page rebuilt every year: the target bracket, the expected fixed income, the IRA amount to withdraw or convert, the taxable account sales with their gain or loss, and the projected tax that falls out of it. We set IRA withholding to cover it, so there are no estimated payments to remember. Then we implement the trades and transfers ourselves, because investment management and tax planning sit with the same advisor.

The order of accounts matters far less than the discipline of looking every year.

Frequently asked questions

Should I ever spend from the Roth first?

Occasionally. In a year when a large expense would push you into a much higher bracket or over an IRMAA threshold, taking that lump from the Roth avoids the spike. The Roth is the pressure-release valve, not the first tap.

What about the 4% rule?

The 4% rule is a spending rate, not a withdrawal order. It tells you roughly how much you can take; sequencing tells you where to take it from. They work together. We wrote about whether the 4% rule still holds.

Does this still matter if my IRA is small?

Less so. If your tax-deferred balance is under a few hundred thousand dollars, RMDs will be modest and the textbook order does little harm. The bigger the IRA relative to spending, the more the sequencing is worth.

How do required distributions fit in?

Once they begin at 73, the RMD is the first money out of the IRA each year whether you need it or not. The bracket-filling approach just starts from that fixed amount. The point of the earlier years is to make the RMD smaller than it would otherwise have been.

Joseph G. Valerio, CFP®, EAFounder and Lead Advisor at Valerio Wealth Management, a fee-only, fiduciary virtual family office in Miami, Florida. One advisor, credentialed in both financial planning and federal tax. About Joseph

This article is general education, not individualized advice, and it is not tax, legal, or accounting advice. Figures reflect federal law for the year stated and can change. Valerio Wealth Management does not prepare or file tax returns. Speak with a qualified professional about your own situation before acting.