Withdrawal strategy basics: which account to draw from first

By The Via Hestia TeamLast reviewed 2026-06-24

Retirement savings isn’t just about accumulation — it’s also about the order in which you spend it down. Two people with identical account balances can have meaningfully different experiences in retirement simply because of how they sequence their withdrawals. Done thoughtfully, the sequencing affects tax liability, account longevity, and the size of what eventually passes to heirs or charity.

This guide covers the basics of how people generally approach withdrawal sequencing, and why it matters more than it might seem.

The three buckets of retirement accounts

Most retirement savers end up with assets in some combination of three tax categories. Understanding the tax treatment of each is the foundation of any withdrawal strategy.

Taxable accounts — brokerage accounts, savings, money market funds. You’ve already paid income tax on the money you contributed. Investment gains are subject to capital gains tax when realized, typically at preferential long-term rates if assets are held more than a year. No mandatory withdrawal schedule.

Tax-deferred accounts — traditional IRAs, 401(k)s, 403(b)s, SEP IRAs. Contributions were made pre-tax (or deducted), and the entire balance — contributions and growth — is taxable as ordinary income when withdrawn. Subject to required minimum distributions starting at age 73.

Tax-free accounts — Roth IRAs, Roth 401(k)s. Contributions were made after-tax, but qualified withdrawals (after age 59½ and meeting holding period requirements) are entirely tax-free, including growth. Roth IRAs have no RMDs during the original owner’s lifetime.

The fundamental tension in withdrawal sequencing is between two competing goals: minimizing taxes now (which suggests drawing from taxable accounts first, where rates may be lower) and minimizing taxes over your lifetime (which sometimes means drawing from tax-deferred accounts earlier to reduce the balance subject to future RMDs).

The conventional sequencing — and why it’s a starting point, not a rule

The traditional advice for withdrawal sequencing goes: draw from taxable accounts first, then tax-deferred, then Roth last. The logic is straightforward — let tax-advantaged accounts grow as long as possible, and preserve the tax-free Roth for last.

For many people, this is a reasonable baseline. But it’s worth understanding why financial planners often modify it.

The problem with always saving Roth for last: Tax-deferred accounts keep growing, and so do future RMDs. Someone who draws exclusively from taxable accounts in their 60s while leaving a large traditional IRA untouched may find themselves with very large RMDs in their 70s — large enough to push income into higher brackets, trigger Medicare IRMAA surcharges, and increase the portion of Social Security subject to tax.

The case for intentional tax-deferred withdrawals early. If someone retires at 62 and delays Social Security until 70, they may have eight years of relatively low income before RMDs begin. Those years can be an opportunity to take strategic withdrawals from traditional IRAs — staying within a specific tax bracket — to reduce the balance that will eventually generate mandatory distributions. Some people also use those years for Roth conversions, paying tax now at a lower rate to reduce future taxable income.

This kind of early-retirement tax planning is one reason financial planners often describe the period between retirement and age 73 as a “planning window” — the landscape of income, brackets, and obligations is more controllable then than it will be once RMDs and full Social Security are both active.

When you claim Social Security matters for withdrawal sequencing, and vice versa.

Delaying Social Security (up to age 70) increases the monthly benefit. But in the years before claiming, you’ll need income from somewhere — likely from retirement accounts. Someone who delays Social Security from 65 to 70 needs five years of income from savings, which means drawing down accounts earlier than they might otherwise.

Whether that tradeoff makes sense depends on health, other income sources, account balances, and how long Social Security is expected to be collected. The Social Security Administration’s online estimator can help illustrate the break-even points between claiming ages.

The interaction goes the other way too: once Social Security is active, it adds to taxable income — which affects how much room remains in lower tax brackets for IRA withdrawals or Roth conversions.

Sequence of returns risk: the withdrawal version

Much retirement planning focuses on accumulation — growing money over time. Withdrawal phase introduces a different risk that gets less attention: sequence of returns risk.

If markets decline significantly in the early years of retirement — right when withdrawals begin — the combination of falling portfolio values and regular withdrawals can permanently impair a portfolio’s ability to recover, even when markets eventually rebound. A portfolio that loses 30% in year two of retirement while also funding annual withdrawals starts the recovery at a much lower base than one that experiences the same loss in year fifteen.

This is why many financial planners suggest holding enough in stable, low-volatility assets (bonds, short-term fixed income, or a cash buffer) to cover one to three years of planned withdrawals — so that a market downturn doesn’t force selling equities at a loss to fund living expenses. The money you’d need in the next year or two doesn’t have to be invested in the market.

Required minimum distributions make this more complex: once RMDs begin, some withdrawals aren’t optional, regardless of market conditions. Understanding how that mandatory floor interacts with your overall income plan is part of what the RMD guide covers.

Capital gains rates: a lever in taxable accounts

Withdrawals from taxable brokerage accounts aren’t necessarily taxed at ordinary income rates. Long-term capital gains — on assets held more than a year — are typically taxed at 0%, 15%, or 20% depending on income. For retirees in lower income years, some gains may be taxable at 0%.

This is another reason early retirement years — before Social Security, RMDs, and other income sources all kick in simultaneously — can offer planning flexibility that disappears later. The income picture is usually most controllable in those first years.

What a withdrawal plan actually looks like in practice

There’s no universally correct withdrawal sequence. What people generally try to achieve is:

Predictable, stable income to cover essential expenses — often anchored to Social Security, a pension if applicable, and a portion of savings structured for reliability
Tax bracket management — keeping total income in a range that avoids unnecessarily triggering higher rates, IRMAA surcharges, or heavier Social Security taxation
Account longevity — making sure the portfolio doesn’t run out before it’s needed, accounting for an unknown lifespan
Legacy or charitable goals, if applicable — Roth accounts, for instance, pass tax-free to heirs; tax-deferred accounts pass the tax liability along with the funds

A written plan that maps out where income comes from in each year — rather than just tracking a total balance — tends to surface potential problems earlier and make the interactions between accounts, taxes, and timing more visible.

Where to get personalized guidance

Withdrawal sequencing is one of the areas where the value of working with a financial planner is most concrete. The interactions between account types, tax brackets, Social Security timing, RMDs, Medicare, and a person’s specific balance sheet are genuinely complex to model without tools. A fee-only financial planner (one who charges for advice rather than earning commissions on products) can run projections across different sequencing strategies.

The CFP Board’s directory at cfp.net is a starting point for finding a certified financial planner. NAPFA (napfa.org) specifically lists fee-only planners.

Sources for this article are linked inline throughout the text above.