The order you take money out of your retirement accounts can cost or save you thousands in taxes. Most people get the retirement withdrawal order backward, and they never see the bill coming.
Here’s the short version. The popular advice is to spend your taxable accounts first, your tax-deferred accounts next, and your Roth accounts last. That sequence is fine for some people. For many, it slowly builds a tax bomb that goes off in your 70s. Let’s walk through why, and what to do instead.
The “common sense” order, and why it backfires
Many retirees own three kinds of accounts, taxable, tax deferred, and a Roth. A taxable account is regular savings or a brokerage account, where you’ve already paid tax on the money. A tax-deferred account is a traditional 401(k) or IRA, where the money went in before taxes and you pay tax when you take it out. A Roth account is one where you’ve already paid the tax, so qualified withdrawals come out tax-free.
The classic rule says: drain the taxable account first, then the tax-deferred, then the Roth. The idea is to let your tax-advantaged accounts grow as long as possible.
The problem is what happens to that traditional 401(k) or IRA while you leave it alone. It keeps growing. Then at age 73, the IRS forces you to start taking money out whether you need it or not. These forced withdrawals are called Required Minimum Distributions, or RMDs. (The starting age rises to 75 for people born in 1960 or later.)
Meet Linda: a $700,000 surprise
Say Linda retires at 63 with $700,000 in her traditional 401(k), a modest brokerage account, and a small Roth. She follows the usual advice and lives off the brokerage account for several years. Her 401(k) sits untouched and keeps growing.
By the time Linda turns 73, that 401(k) has ballooned. Now the RMDs land on top of her Social Security, and they’re large. Three things happen at once:
- Her taxable income jumps, pushing her into a higher tax bracket.
- More of her Social Security gets taxed. Up to 85% of your benefit can become taxable income once your “combined income” climbs high enough. (Combined income is roughly your other income plus half your Social Security.)
- Her Medicare premiums rise, thanks to a surcharge called IRMAA.
Linda didn’t do anything reckless. She just followed the simple rule and skipped the planning. The bill arrived a decade later.
The IRMAA cliff nobody warns you about
IRMAA stands for Income-Related Monthly Adjustment Amount. In plain English, it’s an extra charge on your Medicare premiums when your income is high.
For 2026, if your modified adjusted gross income from 2024 was above $109,000 (single) or $218,000 (married filing jointly), you pay more for Medicare Part B and Part D. The standard Part B premium in 2026 is $202.90 a month. Cross that income line, even by a single dollar, and your premium jumps. That’s why people call it a “cliff.” There’s no gentle ramp.
Two details make IRMAA sneaky. First, it looks back two years, so your 2026 premium is based on your 2024 tax return. Second, a big one-time event, like a large RMD or a poorly timed Roth conversion, can trigger it for a full year.
The smarter move: use your “gap years”
The fix is usually not picking one account and emptying it. It’s blending withdrawals so you smooth out your taxes across your whole retirement.
The golden window is the “gap years,” the stretch after you stop working but before Social Security and RMDs kick in. Your income is often low then, which means you have room in the lower tax brackets going unused.
In those years, two strategies can pay off:
- Tap some tax-deferred money early. Take modest withdrawals from your 401(k) or IRA while you’re in a low bracket, instead of waiting for forced RMDs to hit all at once later.
- Consider Roth conversions. Move money from your traditional account into a Roth and pay tax now, at today’s lower rate, so future RMDs (and future taxes on your Social Security) shrink.
Done carefully, this can lower your lifetime tax bill, reduce how much of your Social Security gets taxed, and keep you under the IRMAA cliff.
There is no one-size-fits-all order
Here’s the honest part. The right withdrawal order depends on your account balances, your other income, your tax bracket, your health, and your goals. The math gets tangled fast, because every move touches your taxes, your Social Security, and your Medicare costs all at the same time.
This is exactly where good planning earns its keep. Seeing the trade-offs side by side, year by year, is far easier with a tool or a plan that can model your specific numbers and show you the cliffs before you walk off one. A few hours of planning in your 60s can be worth tens of thousands of dollars in your 70s and 80s.
The one takeaway
Don’t just default to “taxable first, Roth last.” Look at your full picture and decide your retirement withdrawal order on purpose, ideally during your low-income gap years, so you control your taxes instead of letting your RMDs control them.
This is educational information, not personalized tax or financial advice. Tax rules and dollar figures change, so confirm your own situation with a qualified tax professional, or with the IRS, SSA, and Medicare directly, before you act.
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