Withdrawal Sequencing in Retirement: Which Account to Tap First

A lot of retirees assume the answer is simple.

“Use the brokerage account first.”

“Save the Roth for last.”

“Pull from the IRA when you have to.”

That rule of thumb can work in some situations. But for many retirees, especially those with meaningful savings, Social Security, taxable investments, and future required minimum distributions, the wrong withdrawal order can create unnecessary taxes over time.

The better question is not, “Which account should I tap first?”

The better question is:

Which account should I use this year based on my tax picture, income needs, Roth conversion opportunities, Social Security taxation, Medicare premiums, and future RMDs?

That is where retirement withdrawal sequencing becomes important.

The Three Main Retirement Buckets

Most retirees have some combination of three account types.

Traditional IRA / 401(k):

Withdrawals from traditional retirement accounts are generally taxed as ordinary income. Every dollar you withdraw can increase your taxable income. That can affect your federal tax bracket, how much of your Social Security is taxable, and whether your income eventually triggers higher Medicare premiums through IRMAA.

Roth IRA:

Qualified Roth IRA withdrawals are generally tax-free. They do not increase taxable income, do not make Social Security more taxable, and do not count toward IRMAA. From a tax standpoint, Roth money is often the cleanest dollar in retirement.

Taxable brokerage account:

Brokerage accounts are taxed differently. You may pay tax each year on interest, dividends, and realized capital gains. When you sell investments, the tax depends on cost basis, holding period, and whether you have gains or losses. Long-term capital gains are often taxed at lower rates than ordinary income, and some retirees may even be able to realize gains at a 0% federal capital gains rate depending on their taxable income.

These three buckets are not equal. Each one affects your tax return differently.

That is why withdrawal sequencing matters.

The Standard Rule of Thumb

The conventional retirement withdrawal strategy usually goes like this:

1. Spend taxable brokerage money first
2. Then spend traditional IRA or 401(k) money
3. Save Roth IRA money for last

The logic makes sense on the surface.

The brokerage account is already taxable, so use that first. Let the IRA continue growing tax-deferred. Let the Roth continue growing tax-free for as long as possible.

That strategy is not automatically wrong.

But it is incomplete.

The problem is that it focuses on account type, not the taxpayer’s full retirement picture.

Where the Standard Rule Can Fail

The standard withdrawal order can create problems when there are tax planning opportunities that get ignored.

The Roth conversion window

Many retirees have a window between retirement and required minimum distributions where income may be lower than it will be later.

For some people, this creates an opportunity to convert part of a traditional IRA to a Roth IRA at relatively favorable tax rates.

But if the retiree simply spends down their brokerage account first and ignores Roth conversions, they may miss years where they could have moved money from pre-tax to tax-free at a reasonable tax cost.

The better strategy may be to use a mix of brokerage withdrawals, Roth withdrawals, and Roth conversions depending on the year.

Future RMD planning

Required minimum distributions can become a major issue later in retirement.

For people born in 1960 or later, RMDs generally begin at age 75 under current law. For others, the required beginning age may be earlier depending on birth year.

If a traditional IRA is allowed to grow untouched for too long, future RMDs may become larger than needed. That can increase taxable income, create higher taxes, increase Social Security taxation, and potentially trigger Medicare IRMAA surcharges.

Sometimes the better move is to draw down or convert part of the traditional IRA earlier, before RMDs force the issue.

Social Security tax planning

IRA withdrawals can make more of your Social Security taxable.

That does not mean IRA withdrawals are bad. It means they need to be coordinated.

A retiree may think they are in a low tax bracket, but after factoring in the way Social Security becomes taxable, the real marginal tax impact of an IRA withdrawal or Roth conversion can be higher than expected.

That is why the numbers need to be projected, not guessed.

Medicare IRMAA planning

Higher income can increase Medicare premiums through IRMAA.

IRMAA is based on modified adjusted gross income, and it generally uses a two-year lookback. That means a Roth conversion, large capital gain, or large IRA withdrawal this year can affect Medicare premiums in a future year.

This does not mean you should avoid Roth conversions or gains automatically.

It means the decision needs to be made with the full picture in mind.

Capital gains windows

Some retirees may have years where they can realize long-term capital gains at a 0% federal tax rate.

For 2026, married couples filing jointly may be able to stay in the 0% long-term capital gains bracket with taxable income up to roughly $98,900.

That does not mean all gains are tax-free for every retiree. Other income matters. State taxes may still apply. Taxable income has to be calculated correctly.

But it does mean there may be years where intentionally realizing gains from a brokerage account makes sense.

If those years are missed, the same gains may be taxed later at a higher rate.

Heir planning

If leaving money to children or other heirs is part of the goal, account type matters.

Traditional IRA assets inherited by most non-spouse beneficiaries generally must be emptied within 10 years. Depending on the situation, annual inherited IRA distributions may also be required during that 10-year period.

Those inherited IRA withdrawals are usually taxable to the beneficiary.

Roth IRAs can also be subject to the 10-year rule, but qualified Roth IRA distributions are generally tax-free.

That can make Roth assets much more attractive from an estate and tax planning standpoint.

So if legacy planning is important, blindly saving the traditional IRA and spending other accounts first may not be the best answer.

The Real Withdrawal Sequencing Question

Retirement withdrawal sequencing is not really one question.

It is several questions:

1. What tax bracket are we trying to manage this year?
2. How much income do we need from the portfolio?
3. How much Social Security is taxable?
4. Are we close to an IRMAA threshold?
5. Is there room for a Roth conversion?
6. Is there room to realize long-term capital gains at a favorable rate?
7. What happens to future RMDs if we do nothing?
8. What account type do we want heirs to inherit?

That is a tax projection problem.

It is not a rule-of-thumb problem.

The rule of thumb is what you use when you do not have a projection. The projection is what you use when you want to make an informed decision.

A Retirement Withdrawal Example

Let’s look at a simplified example.

Tom and Sarah are both 65 and retired. Their names are changed.

They have:

• $900,000 in a traditional IRA
• $150,000 in a Roth IRA
• $300,000 in a taxable brokerage account
• $80,000 of unrealized gains inside the brokerage account
• $48,000 of combined Social Security
• $9,000 of interest and dividend income

They need an additional $30,000 from their portfolio this year.

The simple rule-of-thumb approach would be to pull the full $30,000 from the brokerage account.

That may be fine.

But it may also miss an opportunity.

A more tax-aware approach might be:

• Use part of the brokerage account for spending
• Use part of the Roth IRA if needed to manage taxable income
• Consider a partial Roth conversion while they are still in a favorable tax bracket
• Watch how the conversion affects Social Security taxation and future Medicare premiums
• Review whether any capital gains can be realized at a favorable rate

For example, they may decide to take $20,000 from the brokerage account and $10,000 from the Roth IRA for spending.

Then, if the tax projection shows room, they may convert $50,000 from the traditional IRA to the Roth IRA.

That conversion would create taxable income, so it is not “free.” The tax cost would depend on their deductions, how much of their Social Security becomes taxable, their other income, and where the conversion falls within the tax brackets.

But the point is not that every retiree should do a $50,000 Roth conversion.

The point is that the withdrawal decision and the Roth conversion decision should be coordinated.

If Tom and Sarah simply spend brokerage money every year and ignore the IRA, they may arrive at age 75 with a larger traditional IRA, larger RMDs, and fewer planning options.

If they use the years before RMDs carefully, they may be able to reduce future taxable income, build more Roth assets, and create more flexibility later in retirement.

When the Standard Rule Actually Works

The standard withdrawal order can still work well in some cases.

It may be perfectly reasonable when:

• Traditional IRA balances are modest
• There is no meaningful Roth conversion opportunity
• Future RMDs are unlikely to create a tax problem
• The household is not close to IRMAA thresholds
• There is no major legacy planning concern
• The brokerage account has little embedded gain
• The retiree simply needs straightforward income

In those cases, spending taxable assets first and saving Roth money may be a perfectly acceptable strategy.

The key is knowing when the rule applies and when it does not.

Why This Matters More for Retirees With $1 Million or More

The more assets you have, the more important coordination becomes.

A retiree with a small IRA, little taxable income, and limited savings may not have many planning levers to pull.

But a retiree with $1 million or more spread across IRAs, Roth accounts, brokerage accounts, pensions, and Social Security may have several.

That creates opportunity.

It also creates risk.

The opportunity is using tax brackets wisely, managing RMDs, planning Roth conversions, coordinating Social Security timing, and reducing unnecessary taxes over time.

The risk is treating every account the same and hoping the default order works.

That is not a retirement tax strategy.

That is guessing.

What to Do Next

If you are already retired or getting close, and you have meaningful balances in more than one account type, your withdrawal order should not be a one-time decision.

It should be reviewed each year.

Your income needs, tax bracket, Social Security, Medicare premiums, Roth conversion opportunities, capital gains, and future RMDs all matter.

That is exactly the type of issue we look for in a free 30-minute Tax Strategy Session.

We help you identify whether your current withdrawal order, Roth conversion timing, Social Security strategy, and tax picture are working together or working against each other.

Important Note

This article is for general educational purposes only and is based on current tax rules as of 2026. The numbers are illustrative. Your actual situation depends on your specific account balances, tax picture, age, state of residency, income sources, and goals. Tax laws change. This is not personal tax, investment, legal, or financial advice.