What Order to Withdraw From: Taxable, Tax-Deferred, and Roth

Most pre-retirees, by the time they walk into my office, have heard some version of the conventional rule on withdrawal order. "Spend your taxable brokerage account first, then your traditional IRA and 401(k), and save your Roth IRA for last." It's been printed in personal finance books for thirty years. It's repeated by financial podcasts. It's the default answer most CPAs give when asked. And it is — to a real extent — correct. But correct in a "this is fine for most situations and missing a lot for others" kind of way. The conventional rule was built when most retirees had a small Roth balance, no Roth conversion option, and not much variation in tax brackets year over year. None of those assumptions hold in 2026 anymore. Right? Let me walk you through the modern version of the framework.

This article is longer than usual because the topic doesn't compress well. If you have meaningful balances across taxable, tax-deferred, and Roth accounts — and most pre-retirees with $500,000 or more do — the order in which you draw from them over a thirty-year retirement can swing your lifetime tax bill by tens of thousands of dollars. The framework is worth the read.

What each account type actually does

Quick refresher so we're using the same terms:

• Taxable accounts — your regular brokerage account, savings account, and any non-IRA holdings. Interest and dividends are taxed each year. Capital gains are taxed when you sell, at preferential long-term rates if held over a year. Cost basis matters — only the gain is taxed, not the principal.
• Tax-deferred accounts — traditional IRA, traditional 401(k), traditional 403(b). Contributions were deducted on the way in (or never taxed via pre-tax 401(k) deferral). Growth has been tax-deferred. Every dollar that comes out is fully taxable as ordinary income — both principal and growth.
• Roth accounts — Roth IRA, Roth 401(k). Contributions were after-tax (no deduction). Growth is tax-free. Qualified distributions (after age 59½ and the 5-year rule) are tax-free.

The fundamental insight: each account type has a different tax characteristic. Smart withdrawal sequencing uses each type in the year and bracket where its characteristic provides the most value.

The conventional rule, and why it's incomplete

Conventional wisdom: spend taxable first, then traditional IRA, then Roth. The logic:

• Taxable accounts are least tax-efficient over time (interest and dividends taxed annually), so deploying them first gets the inefficient money out of the way.
• Tax-deferred accounts continue growing tax-deferred while you spend taxable, so they keep compounding.
• Roth accounts grow tax-free forever, so save them for last to get the most tax-free compounding.

This logic is sound for steady-income retirees with no Roth conversion strategy and no IRMAA exposure. But it misses three modern realities:

• RMDs force traditional IRA withdrawals at age 73 (rising to 75) regardless of withdrawal order strategy. "Save the IRA for last" is overridden by the law.
• The conversion window in your sixties is a planning opportunity that the conventional rule ignores.
• IRMAA, the Social Security tax torpedo, and the Massachusetts millionaire surtax all care about your annual taxable income, not your lifetime income. Withdrawal sequencing affects yearly bracket exposure.

So the modern framework is more nuanced. It looks at each year separately, fills target brackets intentionally, and uses Roth dollars strategically when they avoid bigger tax problems elsewhere.

The modern framework: bracket-fill, not account-empty

Instead of "spend account A until it's empty, then move to account B," the modern approach is "spend whichever combination of accounts gets to my target bracket this year — and not over it." A simplified version:

The result is a much smoother annual income picture. Some years you draw heavily from tax-deferred (using Roth and taxable as overflow). Some years you draw from Roth to dodge a bracket (with the unrealized gains in taxable continuing to compound tax-free in your hands). Some years you skip Roth withdrawals entirely. The framework is annual, not lifetime.

The pre-RMD years: conversion-and-spend

For retirees in their sixties, before RMDs start, the framework gets even more interesting. The pre-RMD years are when you have the most planning flexibility — you've stopped earning W-2 wages, you may not have started Social Security yet, and you have several years of low-tax-bracket headroom before forced distributions kick in.

The most powerful move in these years is combining withdrawals with Roth conversions. Here's a concrete example:

Couple at 65, retired, not yet on Social Security. They need $80,000 of after-tax spending. They have $300,000 in taxable brokerage, $1.2M in traditional IRA, $200,000 in Roth.

Conventional rule: spend $80,000 from taxable. Brackets stay very low (just dividend income on the rest). Save the IRA. Save the Roth.

Modern approach: spend $50,000 from taxable for living expenses (using qualified dividends and modest capital gains, taxed at 0%-15% federal). Convert $40,000 from traditional IRA to Roth, paying tax at 12% federal. Net taxable income lands around the top of the 12% bracket. Total federal tax owed: roughly $5,000. Roth balance grows by $40,000 of converted dollars. Traditional IRA balance shrinks by the same.

Five years of this approach moves $200,000 from traditional to Roth at 12% federal, before the same dollars would have come out at 22% or 24% post-RMD. Lifetime tax savings: roughly $20,000 on those converted dollars alone. Combined with the conventional savings on the conventional approach, the total improvement runs into the high five or low six figures over a thirty-year retirement.

The post-RMD years: smoothing across categories

After RMDs start (age 73 currently, 75 starting 2033), the framework changes. RMDs force traditional IRA distributions whether you want them or not. The withdrawal-order question becomes: after taking the mandatory RMD, do I need additional spending money this year, and if so, where do I take it from?

The default during RMD years:

• Take the RMD. This is non-optional.
• If the RMD plus your other taxable income is at or below your target bracket, leave the rest of your IRA, taxable, and Roth alone.
• If you need additional spending money:
  • Pull from taxable first if it has low embedded gains (your basis is high, the tax cost is low).
  • Pull from Roth if you'd otherwise blow through an IRMAA bracket or trigger more Social Security taxation. Roth doesn't add to provisional income.
  • Avoid pulling from traditional IRA above the RMD unless your bracket is already higher than your projected future bracket.

One useful planning move during RMD years: use Qualified Charitable Distributions to satisfy part of the RMD. A QCD direct from your IRA to a charity counts toward the RMD but is excluded from AGI. Fewer dollars on the tax return. Lower IRMAA risk. Same charitable giving you'd otherwise do.

Where each account type shines

Quick mental model on when each type does the most work:

• Taxable accounts: Most useful for funding low-tax-bracket Roth conversions in your sixties (the cash to pay the conversion tax). Useful for low-or-zero-tax-bracket dividend and qualified-gain harvesting in low-income years. Useful for charitable giving with appreciated securities. Useful for inheritance step-up basis at death.
• Tax-deferred accounts: Useful for lower-bracket years to fill bracket headroom. Useful for QCDs to charity after age 70½. Useful as an inheritance tool for charity (the charity owes no tax). Required to be drawn down via RMDs after age 73/75.
• Roth accounts: Useful for high-tax-bracket years (don't add to AGI, don't drive IRMAA, don't trigger SS torpedo). Useful for inheritance — heirs receive Roth dollars tax-free under SECURE 10-year rule. Useful as an emergency-flexibility cushion late in life when other tax tools have been exhausted.

Each type has a job. Smart sequencing puts each in the year where its job matters most.

A simple decision tree for any given year

• Step 1: What's your projected taxable income this year before any optional withdrawals?
• Step 2: What's your target bracket ceiling — top of 12%, top of 22%, just under the next IRMAA bracket, just under the SS torpedo zone?
• Step 3: How much room is left between your projected income and your ceiling?
• Step 4: Fill that room with traditional IRA withdrawals (or Roth conversions, if you don't need the cash).
• Step 5: Cover any additional spending need with Roth or low-gain taxable account dollars to stay under the ceiling.
• Step 6: If you're charitably inclined and 70½+, consider QCDs to reduce taxable income further.

The decision tree is annual. Run it every year. The answer changes as your income, your tax brackets, and your account balances change.

What this looks like in practice

The withdrawal-order question feels like financial-planning minutiae until you see what it does to a thirty-year tax bill. The difference between the conventional "drain accounts in order" approach and the modern bracket-fill approach is, for a typical retiree with $1M+ in mixed accounts, somewhere between $50,000 and $200,000 in lifetime taxes paid. That's real money. That's a paid-off second mortgage, two new cars, a major renovation, or a meaningful inheritance for the kids.

The strategy is not exotic. It does require an annual planning conversation, a CPA who's willing to think beyond the tax return, and an advisor who's looking at the whole picture. We do this analysis as part of a written-plan consultation. Sleep at night, knowing the tax math is working with you instead of against you.

The bottom line

The conventional rule of "taxable first, tax-deferred next, Roth last" is a rough starting point that ignores Roth conversions, IRMAA brackets, Social Security taxation, RMDs, and the bracket-fill approach. The modern framework is annual, bracket-aware, and coordinated with conversion strategy. For a typical $1M+ retiree, the lifetime tax difference between the two approaches runs to six figures. The strategy is not exotic, but it does require thought every year. The bigger your accounts, the bigger the impact of getting the order right.