Which Retirement Account to Pull From First — and Why It Matters More Than You Think

The question nobody asks until they're already retired: which account do I take money from first?

It sounds easy. It isn't. Which account you pull from, and when, changes your taxable income every year for the rest of your life. Get it right, and you'll pay significantly less in total taxes over a 20 or 30 year retirement. Get it wrong, and you'll either face a large avoidable tax bill in your seventies or you'll leave money in a Roth account earning tax-free returns you never needed to protect in the first place.

I've run these projections for clients where the difference between two different withdrawal sequences, same portfolio, same spending, was over $100,000 in lifetime taxes. That's a chunk of change for doing nothing other than changing where the money comes from and when.

Why Each Account Type Matters

Your traditional IRA and 401k are pre-tax. Every dollar you pull out is ordinary income, taxed at your marginal rate that year.

Your Roth IRA is after-tax. Withdrawals are completely tax-free, and there are no RMDs forcing you to take money out during your lifetime.

Your taxable brokerage account sits somewhere in the middle. Withdrawals are largely taxed at favorable capital gains rates when you sell an investment, which are lower than ordinary income rates, and you only pay tax on the gain, no tax on the amount you initially invested.

The sequence you choose determines your taxable income each year. Your taxable income determines your bracket. Your bracket affects how much of your Social Security gets taxed, whether you hit IRMAA thresholds on Medicare, and what you owe in April.

What Strategic Sequencing Actually Looks Like

The goal is to manage taxable income deliberately across your whole retirement, not just minimize taxes in year one.

In the gap between retirement and age 73, I often recommend clients utilize their taxable investment accounts in addition to other income sources, if they have those available. If there is room in the current tax bracket and it makes sense, then Roth conversions are also in the discussion. The goal is to draw down the pre-tax balance while you're in a lower bracket, before RMDs are forced on you.

Some years, that means pulling heavily from the IRA. Some years, it means using more taxable account gains to fund spending. Other years, it means doing a Roth conversion on top of regular withdrawals. The mix changes based on what other income is already showing up that year.

This is one of the main things I do for ongoing clients, not just in year one but every year. The right sequence shifts based on income, account balances, tax law, and life circumstances. It's not a one-time decision.

Social Security Changes the Calculation

Up to 85% of Social Security income is taxable as ordinary income, depending on your total combined income. Adding a large IRA withdrawal on top of Social Security in the same year can push more of the Social Security benefit into taxable income.

This is one reason some clients benefit from delaying Social Security while taking more from the IRA early in retirement. They fill low brackets with IRA income when Social Security isn't yet stacking on top of it.

There's no universal answer here. It depends on your Social Security amount, your other income, your IRA balance, and your projected RMDs. Running the numbers specific to your situation is the only way to know.

I'm a fee-only CFP in Pleasant Grove, Utah, working with pre-retirees across the country on exactly this kind of planning. Book a free intro call below.