Which Account Comes First? Planning Your Retirement Withdrawals
Your retirement income may come from several accounts. Choosing how much to draw from each starts with your spending needs, expected income, and tax situation.
October 12, 2026
When you retire, someone has to decide where each month's spending money comes from. Your savings may include an employer plan, traditional and Roth IRAs, and an investment account. Social Security, a pension, or income from property may cover part of the budget.
These sources have different tax rules. A withdrawal plan helps you decide which accounts to use, how much to request, and when to reconsider the decision.
Start With the Spending Your Accounts Need to Cover
List your regular expenses and the larger costs you expect during the year. Include taxes, insurance, and expenses that arrive less often, such as home repairs.
Then identify income that arrives without an investment withdrawal. Subtract that income from your spending estimate. If you receive rent or farm lease payments, allow for vacancies, repairs, and changes in payment timing. The remaining amount is the spending your savings need to support.
Keep the estimate flexible. A useful plan can accommodate an unexpected expense without requiring you to rebuild the entire budget.
Compare the Tax Treatment Before Choosing an Account
A common approach is to spend taxable accounts first, traditional retirement accounts next, and Roth accounts later. It preserves tax-advantaged balances for longer, but it does not suit every household.
Selling an investment in a taxable account may produce a capital gain or loss; proceeds are not necessarily all taxable income. Traditional retirement withdrawals generally create ordinary income, with exceptions for after-tax amounts. Qualified Roth distributions are tax-free, subject to the account's rules.
Your tax preparer can estimate the effect of a proposed combination. A smaller traditional IRA withdrawal alongside taxable-account proceeds may fit one year. A different mix may suit a year with a property sale or a large medical deduction.
Include Social Security and Required Distributions
Waiting beyond full retirement age increases a Social Security retirement benefit through delayed retirement credits, which stop accruing at age 70. Waiting also means meeting current expenses from other sources. Consider health, household income, and potential survivor benefits before deciding.
Traditional IRAs and many workplace accounts eventually require minimum distributions. The applicable starting date depends on factors such as birth year, account type, and employment status. Workplace-plan rules can differ from IRA rules. Confirm the deadlines for each account with the administrator.
A required distribution can supply spending money, but it may exceed what you need. It cannot be converted to a Roth IRA. Additional withdrawals or conversions should be evaluated separately.
Consider a Conversion Alongside the Withdrawal Plan
A partial Roth conversion may be worth reviewing in a lower-income year. The taxable amount of the conversion adds to current income, while qualified future Roth withdrawals receive different tax treatment.
A conversion is not automatically beneficial. Its cost depends on current taxes, expected future taxes, how the tax bill will be paid, and how long the money may remain invested. Medicare premiums or other income-based benefits may also be affected. Ask your tax preparer to review the proposed amount before it is processed.
Keep Near-Term Spending Accessible
Withdrawals during a market decline can put additional pressure on a portfolio. Accessible cash or suitable short-term holdings may help cover expenses without selling longer-term investments immediately.
The reserve should reflect your income stability and needs. Holding too much cash has costs, including inflation and reduced growth potential. A reserve cannot prevent investment losses or guarantee that markets recover before it is used.
Review the plan when income, spending, or family circumstances change. Before year-end, confirm any remaining distributions and the tax treatment of withdrawals already made.
What This Means For You
- Estimate the spending that pensions, benefits, and other income do not cover.
- Compare account choices using the tax return as well as the account balances.
- Confirm distribution deadlines separately for each retirement account.
- Discuss conversions and large withdrawals before requesting them.
At Thiesen Dueker, retirement income planning considers how your investments and other income support your needs. Bring your account statements and spending estimate to your advisor, and include your tax preparer when comparing withdrawal choices.
To discuss your retirement income needs, contact a Thiesen Dueker advisor at thiesendueker.com/contact or call (559) 448-8190.
Frequently Asked Questions
Should I spend my taxable accounts first?
That can be a useful starting point. Compare it with a mix of withdrawals that accounts for your tax situation, required distributions, and future spending.
Does waiting for Social Security change the withdrawal plan?
Yes. You need another source of income while you wait. Compare the larger future benefit with the withdrawals needed in the meantime.
Should I use Roth money for a large expense?
A qualified Roth withdrawal may avoid additional taxable income, but it also reduces the balance available for later needs. Review the expense and the account's distribution rules first.
Sources
Important Disclosures
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Investing involves risk including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
This material was prepared for Thiesen Dueker's use.
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