Which Accounts Should I Withdraw From First in Retirement
- Matt Brennan, CFP®
- 16 minutes ago
- 13 min read
If you’ve been searching “which accounts should i withdraw from first in retirement”, you’re really asking a more sophisticated question: How do I turn my personal balance sheet into reliable cash flow while controlling taxes and Medicare costs?
For affluent retirees, the withdrawal “order” is rarely a simple “taxable dollars, then IRA dollars, then Roth dollar” story. It’s a tax strategy.
Because withdrawals change your income, and income changes your tax bill, and potentially your Medicare premiums, all of these factors must be considered.
At Covenant Wealth Advisors, we help clients coordinate retirement withdrawals with tax planning, Medicare considerations, and estate planning goals in mind.
The strategy is designed to hold up not just in year 1, but in many years and hopefully across decades.
Key Takeaways
Start with constraints first: RMD rules, pension cash flow, and Social Security timing set the baseline.
Treat “withdrawal order” as MAGI management (Modified Adjusted Gross Income), especially around Medicare IRMAA tiers and the NIIT (Net Investment Income Tax) thresholds.
Many retirees benefit from using taxable assets early—but only if they understand capital gains, NIIT exposure, and step-up in basis tradeoffs.
Roth accounts are strategic: Roth IRA owners generally aren’t required to take withdrawals during life, which can provide flexibility later and help avoid retirement mistakes.
Roth conversions can be powerful in some years and counterproductive in others—because conversions can raise MAGI and trigger IRMAA tiers.
Charitably inclined retirees may consider QCDs once eligible, since QCDs can count toward RMDs and may help manage taxable income (rules apply).
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Which Accounts Should I Withdraw From First in Retirement?
For many retirees, a common starting point is: use cash reserves first, then draw from taxable brokerage accounts, then tax-deferred IRA/401(k) accounts (including any required minimum distributions), all the while using Roth accounts strategically.
But for affluent households, the real “order” is often a planned mix designed around taxes, Medicare thresholds, and legacy goals—not a fixed sequence.
Here’s the framework we use when building a withdrawal strategy that’s both practical and tax-aware.
Step 1: Separate Your Accounts Into “Tax Buckets”
Most retirees have some mix of:
Taxable (brokerage) accounts
Typically produce dividends, interest, and realized capital gains when you sell. Gains depend on your cost basis. Also relevant for step-up in basis planning for heirs.
Tax-deferred accounts (traditional IRA, rollover IRA, 401(k), 403(b), etc.)
Withdrawals are generally included in taxable income (with exceptions for after-tax basis). The IRS notes you generally must begin withdrawals at age 73 (or 75 if you were born in 1960 or later) via Required Minimum Distributions (RMDs).
The IRS notes Roth IRAs generally do not require withdrawals while the owner is alive (beneficiaries have different rules).
This isn’t just labeling. It’s how you avoid accidental income spikes.
Step 2: Identify Your “Must-Take” Income First
Before you decide what to “withdraw first,” list what you’ll receive regardless of withdrawals:
Pension income (if applicable)
Social Security (if started)
Interest/dividends that occur without selling
RMDs once they apply
RMDs matter because they turn a choice into a requirement. The IRS explains you generally must start taking RMDs from certain retirement accounts at age 73 (or 75 if born in 1960 or later), with timing rules for the first year.
“In retirement, the question isn’t ‘Which account do I tap first?’ It’s ‘How do I draw from all accounts in a way that doesn’t create a tax surprise later?’” — Mark Fonville, CFP®
Step 3: Understand Why “Taxable First” is Common (and When it Isn’t)
Many sophisticated retirees start with taxable assets because:
You may be able to control how much gain you realize (by choosing what to sell, and when).
You can often harvest losses or manage gains (strategy-dependent).
You don't like paying taxes now and don't have a grasp of the future tax impact of your decision.
Inherited assets may receive a basis adjustment: the IRS explains basis of inherited property is generally the fair market value on the date of death (or an alternate valuation date in certain cases).
But “taxable first” is not automatically right. Here are common reasons an affluent retiree might withdraw from tax-deferred earlier than expected:
Lower-income years before RMDs: If you retire at 60 and RMDs start at 75, you may have a planning window where filling lower tax brackets (or doing partial Roth conversions) could reduce future RMD pressure.
Reducing future Medicare premium exposure: Ironically, strategic IRA withdrawals (or conversions) in earlier years might reduce later RMDs that could push you into higher IRMAA tiers once you’re on Medicare (more on that below).
If your spouse dies in the future, you could be catapulted into a higher federal tax bracket because you change from filing as married to filing as an individual.
Your children are in a higher tax bracket than you and it's better to pay taxes now at your lower tax bracket than your children to pay taxes at their tax bracket upon inheritance.
Step 4: Treat Roth as a “Strategic Reserve,” Not a Default Spending Account
Because Roth IRAs generally don’t require lifetime withdrawals, Roth dollars can be uniquely valuable for:
Managing MAGI (especially if you’re near Medicare IRMAA thresholds)
Funding large one-time purchases without increasing taxable income as much (rules apply)
Estate/legacy planning (depending on your goals and beneficiary situation)
The IRS notes Roth IRA owners generally aren’t required to take withdrawals during life.
Step 5: Don’t Ignore Mechanics: RMD Deadlines and Penalties
Two details that should be explicitly in your plan:
First RMD deadline: The IRS describes the “required beginning date” for your first RMD (often April 1 of the year following the year you turn 73 or 75, depending on your birth year, with plan-specific nuances). We recorded a video about the topic here.
Penalty risk: The IRS notes a potential 25% excise tax on the amount not distributed as required (reduced to 10% if corrected within 2 years), and points to Form 5329 for reporting.
Why this matters to “withdrawal order”: If you’re forced to take a large RMD later, it can compress your planning options and cascade into Medicare premium impacts, NIIT exposure, and Social Security taxation.
How Do Medicare IRMAA and Other “Income Cliffs” Change the Withdrawal Order?
If you have $1M+ in investable assets, your withdrawal order is often really an income-management plan.
IRA withdrawals, Roth conversions, and large taxable gains can push Modified Adjusted Gross Income (MAGI) into higher Medicare IRMAA tiers, increase taxes on Social Security benefits, and potentially trigger the 3.8% Net Investment Income Tax—so timing and account selection matter.
This is where many “generic” withdrawal articles fall short. For affluent retirees, income cliffs are often the hidden driver.
The key concept: MAGI is the scoreboard.
For Medicare IRMAA purposes, SSA guidance defines MAGI as AGI + tax-exempt interest (and notes the income used is generally from two years prior to the premium year).
This is why a one-time income spike—such as a large IRA withdrawal, big capital gain, or Roth conversion—can have consequences beyond “just taxes.”
Data visualization: 2026 Medicare IRMAA tiers (Part B + Part D)
2026 MAGI (Single) | 2026 MAGI (Married Filing Jointly) | Part B Total Monthly Premium (2026) | Part D Monthly IRMAA Surcharge (2026) |
≤ $109,000 | ≤ $218,000 | $202.90 | $0.00 |
$109,001 – $137,000 | $218,001 – $274,000 | $284.10 | $14.50 |
$137,001 – $171,000 | $274,001 – $342,000 | $405.80 | $37.50 |
$171,001 – $205,000 | $342,001 – $410,000 | $527.50 | $60.40 |
$205,001 – < $500,000 | $410,001 – < $750,000 | $649.20 | $83.30 |
≥ $500,000 | ≥ $750,000 | $689.90 | $91.00 |
Source: CMS Medicare 2026 premiums/deductibles fact sheet (Part B premium totals and Part D IRMAA amounts).
Interpretation (what affluent retirees should notice):
These are step-ups, not smooth phase-ins. If you’re close to a tier boundary, the “best account to draw from first” might be the one that gets you the cash you need without pushing MAGI into the next tier.
Two additional “income cliffs” that commonly collide with IRMAA
Social Security taxation (often overlooked in drawdown planning): SSA explains you may pay taxes on up to 85% of Social Security benefits if your “combined income” exceeds certain thresholds; combined income includes AGI + tax-exempt interest + ½ of Social Security benefits.
Even if you’re financially sophisticated, it’s easy to underestimate how a large IRA withdrawal can make more of your Social Security taxable.
Net Investment Income Tax (NIIT): The IRS explains the 3.8% NIIT can apply to individuals above MAGI thresholds (e.g., $250,000 for married filing jointly and $200,000 for single/head of household).
This is why “spending from brokerage first” can be nuanced: selling appreciated positions can increase gains, which can increase MAGI, which can trigger NIIT and potentially IRMAA.
“We see retirees focus on ordinary income tax brackets—but for higher-net-worth households, the real shock is often Medicare IRMAA and how quickly MAGI-driven costs can escalate.” — Scott Hurt, CFP®, CPA
Practical Ways to Manage These Cliffs (Without Letting Taxes Run Your Life)
Here are the levers many retirees consider (such as Safe Withdrawal Rates, always in the context of a broader plan):
Blend withdrawals across tax buckets instead of draining one bucket entirely.
Example: some ordinary income from IRA + some cash needs from taxable basis + some from Roth, depending on your MAGI target.
Time Roth conversions intentionally.
A Roth conversion increases taxable income and MAGI in the year of the conversion, which can trigger IRMAA tiers. But in some scenarios, conversions earlier may reduce future RMD size.
Use QCDs if charitably inclined and eligible.
The IRS describes QCD eligibility (including the 70½ age rule) and notes a QCD can count toward an RMD.
Also note: the IRS announced the aggregate amount of QCDs not includible in gross income increased from $108,000 to $111,000 for 2026.
Avoid accidental “one-year income spikes” when possible.
Large RMD timing decisions, concentrated stock sales, or big conversions can create spikes. Sometimes they’re unavoidable; the point is to model them.
Risk/Tradeoff reminder: Optimizing for IRMAA or NIIT shouldn’t force you into holding an inappropriate asset allocation, taking excessive concentration risk, or delaying necessary spending.
Taxes are important—but they’re one constraint among many.
What is a Practical Year-By-Year Withdrawal Strategy for Affluent Retirees?
A practical withdrawal strategy is built annually: forecast spending, map predictable income, estimate taxable income/MAGI, then choose a planned mix of withdrawals from taxable, tax-deferred, and Roth accounts.
The goal is to meet spending needs while managing RMD requirements, Medicare IRMAA thresholds, and long-term estate goals—knowing the “right mix” can change every year.
Here’s a repeatable process you can run each planning season.
The “Retirement Withdrawal Playbook” (annual workflow)
Forecast next year’s cash need (and keep liquidity realistic)Start with a simple question: How much cash do we need from the portfolio this year?
Then pressure-test it:
One-time items (travel, renovations, vehicle, gifting)
Health care expenses
Taxes (federal + state)
Portfolio rebalancing needs
Risk note: Pulling from volatile assets to fund near-term spending can create sequence risk if markets are down. Having a liquidity plan (cash reserve, bond ladder, etc.) may reduce forced selling—but it also has opportunity cost.
Build an income map: “guaranteed-ish” vs. variable. List the baseline income sources you expect:
Social Security (if started)
Pension (if applicable)
Required distributions (if already age 73+)
Interest/dividends/rents
If you haven’t started Social Security yet, remember the decision interacts with withdrawals. SSA notes benefits stop earning delayed retirement credits at age 70.
Estimate your MAGI (because MAGI drives more than income tax). For Medicare IRMAA purposes, SSA guidance explains MAGI is AGI plus tax-exempt interest, and the premium year is generally based on tax information from two years prior.
So when you’re deciding “where to withdraw first,” the planning question becomes:
What MAGI level are we comfortable with this year?
Are we near an IRMAA tier edge?
Are we near NIIT thresholds?
Identify required actions and deadlines.
If RMDs apply, map deadlines early:
IRS: first-year RMD timing rules and “two distribution dates” issue (April 1 and December 31 timing).
IRS: penalty risk for missing/under-withdrawing required minimum distributions (RMD management for high-net-worth retirees) (25% excise tax; reduced to 10% if corrected within 2 years).
If you’re still working at 73 and participating in certain plans, the IRS describes that some employer plans may allow delaying RMDs until retirement (plan rules govern).
Choose the withdrawal “mix” (not just the order). A practical approach many affluent retirees consider:
Meet baseline spending with a combination of:
Taxable (especially if you can sell lots with minimal gains).
IRA/401(k) withdrawals up to a planned ordinary-income level.
Roth as a “pressure valve” in years when income is already high.
Layer in tax planning tools when appropriate:
Roth conversion + Form 8606 considerations (especially if you have after-tax basis).
QCDs if eligible and charitably inclined.
Capital gains management in taxable accounts (including NIIT awareness).
Protect estate planning optionality.
If leaving assets to heirs is part of the plan, don’t ignore step-up in basis dynamics.
The IRS explains inherited property basis is generally the fair market value on date of death (with certain exceptions/alternate valuation rules).
For more on optimizing your retirement and legacy plans, consider these IRA withdrawal strategies to maximize your savings.
A simplified example (hypothetical, not personalized advice):
Assume a married couple, both 67, with:
Taxable brokerage: $900k
Traditional IRA/401(k): $1.7M
Roth IRA: $400k
Social Security started: $0 (planning to claim later)
Spending need from portfolio: $120k/year
A potential plan might look like this guide on how often you should rebalance your portfolio in retirement:
Use taxable sales (managing realized gains) for a portion of spending.
Take IRA withdrawals to “fill” a planned ordinary-income level (and potentially do partial Roth conversions in lower-income years before RMDs).
Use Roth as a reserve for years with unusually high income (to help manage MAGI and IRMAA exposure).
Re-evaluate annually once Social Security begins and later once RMDs apply at 73.
This isn’t about “taxable first” as a rule—it’s about matching each year’s cash need to that year’s tax and Medicare realities.
Any withdrawal strategy has risks and constraints, including:
Market risk and sequence risk: selling in a down market can permanently impair the portfolio if done aggressively.
Tax-law and Medicare rule risk: thresholds and rules can change; strategies that work today may need adjustment.
Liquidity constraints: some assets may have lockups, surrender charges, or unfavorable tax treatment if sold quickly.
Concentration risk: avoiding capital gains at all costs can leave you overexposed to a single position.
Roth conversion risk: conversions increase current taxable income (and potentially IRMAA exposure) even if they may reduce future tax-deferred balances.
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TAX PLANNING FOR RETIREMENT - identify tax reduction strategies including Roth conversions, RMD management, charitable giving and more...
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INVESTMENT MANAGEMENT - personalized investing to grow and protect your wealth in retirement.
Frequently Asked Questions
In What Order Should I Withdraw From My Retirement Accounts?
A common baseline order many retirees start with is: cash reserves → taxable brokerage → tax-deferred IRA/401(k) (including RMDs) → Roth accounts.
But high-net-worth retirees often do better with a planned withdrawal mix designed around MAGI targets, Medicare IRMAA tiers, and long-term tax exposure—so the “right order” can vary year to year.
The most important step is to model the next 1–3 tax years, not just pick a single universal sequence.
What's the Best Order for Drawing Your Retirement Income?
There isn’t one universally “best” order—because the best order depends on your tax bracket, your MAGI relative to Medicare IRMAA thresholds, whether Social Security is started, and whether RMDs apply.
In practice, many affluent retirees use a blended approach: some taxable withdrawals, some tax-deferred income, and Roth strategically to manage income cliffs and flexibility.
If you’re close to an IRMAA tier edge, the best “order” may be the one that meets spending needs without pushing MAGI over a threshold.
What is the Best Withdrawal Strategy for Retirement?
A strong retirement withdrawal strategy is a repeatable annual process: forecast spending, map guaranteed income, estimate taxable income/MAGI, then select withdrawals across account types to meet cash needs while managing RMD rules and income cliffs.
The strategy should be revisited each year, because taxes, market returns, and life events can change the optimal mix.
If you want a “single sentence”: it’s less about a fixed order and more about controlling the income that shows up on your tax return.
What is the Number One Mistake Retirees Make?
One of the biggest mistakes is treating withdrawals as a simple spending decision instead of a coordinated tax and Medicare decision.
Large IRA withdrawals or conversions can raise MAGI, which may increase Medicare premiums (IRMAA), trigger NIIT, and increase taxation of Social Security benefits.
The result is avoidable complexity and higher all-in costs.
A second common mistake: ignoring RMD deadlines until the year they start.
Conclusion
The point of answering “which accounts should i withdraw from first in retirement” isn’t to memorize a universal rule, rather, it’s to build a system that coordinates RMDs, Medicare premiums, Social Security taxation, and portfolio risk—year after year.
At Covenant Wealth Advisors, we routinely help affluent retirees build this kind of coordinated drawdown plan—so the strategy is intentional, documented, and easier to implement.
Would you like our team to just do your retirement planning for you? Contact us today for a complimentary retirement roadmap experience.
About the author:
Senior Financial Advisor
Matt is a Senior Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 20 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.