Which Account Do I Spend First? The Retirement Question That Can Be Worth Thousands

You spent 30 or 40 years filling up retirement accounts. The 401(k), the IRA, the Roth, the brokerage account, and maybe a savings account you lovingly call “the emergency fund” even though it once bought a boat. Now comes the part nobody ever practiced: taking the money back out. And it turns out the order you do it in can matter almost as much as how much you saved.

Not all dollars are created equal

Most retirees have money sitting in three different tax “flavors.” Taxable brokerage accounts, where you generally only owe tax on the growth, often at friendlier capital gains rates. Tax deferred accounts like traditional IRAs and 401(k)s, where every dollar that comes out is taxed as ordinary income. And Roth accounts, where qualified withdrawals come out tax free. In retirement, a dollar is not just a dollar. It depends on which drawer you pull it from.

The “conventional wisdom” order

The classic advice goes like this: spend the taxable account first, then the tax deferred accounts, and save the Roth for last so it can keep growing tax free. It sounds sensible, and it is not crazy. But it can quietly set up a tax problem that shows up a decade later.

Fidelity modeled a hypothetical retiree named Joe with $500,000 spread across a taxable account, a traditional IRA, and a Roth. Following the traditional order, his money lasted nearly 23 years and he paid just over $56,000 in total taxes, with a big “tax bump” once the taxable account ran dry. When he instead pulled from all three accounts proportionally, his lifetime tax bill dropped to about $34,000 and his money lasted almost a full year longer.¹ In Fidelity’s model, same savings, same spending, roughly $22,000 less sent to the IRS. Nobody touched the investments. They just changed the order.

The sneaky window before RMDs

Here is where a lot of the opportunity hides. Many people retire in their early to mid 60s, but the IRS does not force withdrawals from traditional IRAs and 401(k)s until age 73 if you were born 1951 through 1959, or 75 if you were born in 1960 or later.^2,3 Those in between years often come with unusually low taxable income. That is a window, not a vacation.

In 2026, a married couple stays in the 12% federal bracket on taxable income up to $100,800, and can realize long term capital gains at a 0% federal rate on taxable income up to $98,900.⁴ Filling those low brackets on purpose, whether by harvesting gains at a 0% federal rate (Minnesota and Colorado still tax them) or converting some traditional IRA dollars to Roth and paying the tax now at 12%, can shrink the future required distributions that would otherwise shove you into higher brackets later. And skipping a required distribution is not a great plan either. The IRS charges a 25% excise tax on the amount you should have taken.²

The domino effect nobody warns you about

Withdrawals do not just change your tax bracket. They ripple into other parts of your retirement:

• Social Security. Up to 85% of your benefit can become taxable once a married couple’s “combined income” tops $44,000.⁵ An extra IRA withdrawal can drag more of your Social Security into the taxable column right along with it.
• Medicare. The standard Part B premium in 2026 is $202.90 a month, but a couple with modified adjusted gross income over $218,000 pays $284.10 per person, and Medicare looks back at your tax return from two years earlier.⁶ A big withdrawal at 63 can raise your Medicare bill at 65. Surprise! (Our Medicare and IRMAA article walks through the full bracket table.)
• The new senior deduction. From 2025 through 2028, taxpayers 65 and older can claim an extra $6,000 deduction each ($12,000 for a qualifying couple), but it phases out once modified adjusted gross income passes $75,000 single or $150,000 joint.⁷ Pull too much in one year and you shrink a break Congress only made temporary.

So what is the “right” order?

The frustrating answer is that there is no single right order. The best sequence depends on your mix of accounts, when you claim Social Security, your tax bracket today versus later, whether you are charitably inclined, and what you hope to leave to the kids. For most people, the answer is not one order at all. It is a year by year plan that blends accounts to keep taxes smooth instead of lumpy.

The bottom line

Withdrawal order is one of the few retirement decisions that can put real dollars back in your pocket without taking on a lick of extra investment risk. At Swan Wealth we look at your accounts, tax brackets, Social Security timing, and Medicare thresholds together, so every withdrawal has a job and none of them show up as a surprise on next year’s tax return. If you are within five years of retirement, or already retired and wondering whether you are pulling from the right accounts, give us a call. Bring your statements and your questions. We will bring the coffee and the spreadsheets.

This is general education, not personalized tax or financial advice. The right withdrawal order depends on your full picture, including your account mix, income sources, and goals, so let’s run the numbers on yours before the IRS runs them for you.

Sources

1. Fidelity Viewpoints, “Savvy tax withdrawals”: hypothetical comparison of a $500,000 portfolio using a traditional sequential withdrawal order versus a proportional withdrawal strategy, including total taxes paid and portfolio longevity. https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals
2. Internal Revenue Service, “Retirement topics: Required minimum distributions (RMDs)”: RMDs generally begin at age 73, Roth IRAs are not subject to RMDs during the owner’s lifetime, and a 25% excise tax applies to amounts not distributed as required. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
3. Charles Schwab, “Required Minimum Distributions: What’s New in 2026”: RMDs begin at age 73, or age 75 for those born in 1960 or later. https://www.schwab.com/learn/story/required-minimum-distributions-what-you-should-know
4. Tax Foundation, “2026 Tax Brackets and Federal Income Tax Rates”: 2026 standard deduction, the 12% bracket for joint filers extending to $100,800, and the 0% long term capital gains rate applying up to $98,900 for married couples. https://taxfoundation.org/data/all/federal/2026-tax-brackets/
5. Social Security Administration, “Income Taxes and Your Social Security Benefit”: combined income thresholds of $32,000 and $44,000 for joint filers, above which up to 50% and 85% of benefits may be taxable. https://www.ssa.gov/benefits/retirement/planner/taxes.html
6. Kiplinger, “Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D”: 2026 standard Part B premium, first IRMAA tier thresholds, and the two year income lookback. https://www.kiplinger.com/retirement/medicare/medicare-premiums-2026-irmaa-brackets-and-surcharges-for-parts-b-and-d
7. Internal Revenue Service, “Working Families Tax Cuts: Tax deductions for working Americans and seniors”: the $6,000 enhanced deduction for taxpayers 65 and older for 2025 through 2028, with phaseouts above $75,000 and $150,000 of modified adjusted gross income. https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors