A retirement withdrawal strategy is a plan for which income sources, investments, and accounts you use to fund your spending after you stop working. No single order works for everyone. The right approach depends on your age, the types of accounts you hold, when you claim Social Security, whether you have a pension, and your tax situation.
Most people spend decades learning how to save. Turning those savings into a steady paycheck is a different skill, and the choices you make early can shape your options for years. This guide walks through the five questions our team works through when building a withdrawal plan, based on our Retire Right podcast discussion. For a shorter take on the order of withdrawals, see our episode write-up, Which Retirement Account Should You Withdraw From First?
What Are the Steps in a Retirement Withdrawal Strategy?
- Identify your income floor. Add up income that is already in place, such as Social Security, pensions, and rental income.
- Compare the floor to your spending. The gap is what your portfolio may need to fill.
- Decide which investments to use. Interest and dividends come first, then sales and rebalancing.
- Decide which accounts to draw from. Taxable, tax-deferred, and Roth accounts are taxed differently.
- Revisit the plan at each age milestone. Ages 59½, 65, and the start of required minimum distributions (RMDs) can each change the picture.
Step 1: What Is Your Income Floor?
Your income floor is the amount of income you can reasonably plan on every year for the rest of your life. It usually includes Social Security, a pension if you have one, and any other recurring income such as rent. If you are married, survivor benefits can matter as well.
A floor can rise over time. If you start claiming Social Security later, for example, your floor steps up at that point. Some floors adjust for inflation and some do not, so it helps to know which is which. For help with claiming decisions, see our Social Security playbook.
Step 2: How Much Will Your Portfolio Need to Provide?
Compare your income floor to your expected spending. If the floor covers your needs, your portfolio may have more flexibility. If it falls short, the difference is the amount your investments may need to supply, and that is where your withdrawal strategy begins.
Many people have heard of the 4% rule, a rule of thumb that suggests a portfolio could support withdrawals of about 4% of its starting value per year. It is meant as an average over the life of a plan, not a rule for every single year. Spending can run higher in the early years, before Social Security or a pension begins, and lower later on. It is a starting point for a conversation, not a guarantee, and your own numbers may call for a different rate.
Step 3: Which Investments Should You Sell First?
Choosing an account is only half the decision. You also have to choose which investments to sell to raise the cash. This is where portfolio management and rebalancing come in.
A portfolio that holds both stocks and bonds can give you more choices. Interest and dividends can fund part of your income without selling anything. When you need more than that, you can look at what is up and what is down. If stocks have fallen, you may be able to draw from bonds or cash instead of selling stocks at a low. Selling stocks during a steep decline while also taking withdrawals can compound a loss, which is one reason retirees often hold a more balanced mix than they did while saving.
All investing involves risk, including the potential loss of principal, and diversification does not ensure a profit or protect against loss.
Step 4: Should You Withdraw From Taxable, Tax-Deferred, or Roth Accounts?
Each account type follows different rules, which is why two retirees with the same total savings can face very different decisions.
| Account type | Examples | How withdrawals are generally treated | Flexibility |
| Taxable | Brokerage and bank accounts | Taking out cash is not a taxable event. Interest and dividends are taxed as earned, and sales at a gain are taxed at capital gains rates. | No age limits and no RMDs |
| Tax-deferred | Traditional IRA, 401(k) | Withdrawals are generally taxed as ordinary income. | Early withdrawal rules and RMDs apply |
| Roth | Roth IRA, Roth 401(k) | Qualified withdrawals may be tax-free, subject to the account's rules. | No lifetime RMDs for a Roth IRA owner, and none for Roth 401(k) accounts starting in 2024 |
Is the “taxable, then tax-deferred, then Roth” rule right for everyone?
That order is a common rule of thumb, and it can be a reasonable place to start. But it can also be too simple. It does not account for the tax brackets you may be in later, the effect of income on Medicare premiums, or what you hope to leave to heirs. In some situations the order gets flipped. We do not believe there is one universal order, and it is worth testing the rule against your own projections.
Should you use your IRA before you have to?
Many people assume an IRA should stay untouched until the money is needed or until RMDs begin. For people with large pre-tax balances, that approach can lead to a tax bill that jumps later. A useful first step is to project your taxable income over the life of your plan as if you changed nothing, then look for big jumps in tax bracket.
A common pattern is a low bracket early in retirement, before Social Security and RMDs begin, followed by a much higher one once RMDs start. That pattern can be a sign to look at lower-income years as an opportunity. Two tools are often compared:
- Taking IRA withdrawals to cover spending. This meets a near-term need and creates taxable income.
- Roth conversions. Moving money from a traditional IRA to a Roth IRA is also taxable in the year of the conversion, but it serves a longer-term goal. See the IRS Roth IRA overview for how conversions are taxed.
Which one fits depends on your goals. Someone focused on income now may simply spend from the IRA within the limits of their current tax bracket. Someone focused on leaving assets to the next generation may weigh Roth conversions more heavily. Either choice can involve trade-offs, and conversions cannot be reversed once made. Our article on tax bracket equilibrium and our Roth IRA overview go deeper on these topics.
Step 5: How Do Age Milestones Change Your Withdrawal Strategy?
Your age changes both the rules and your income picture. These are the milestones we see most often.
| Milestone | What can change |
| Before age 59½ | Withdrawals from IRAs and most workplace plans may trigger a 10% additional tax on top of ordinary income tax, unless an exception applies. Having money in taxable accounts can add flexibility. See our guide to accessing retirement accounts before 59½. |
| 59½ to Social Security | Without Social Security or a pension in place, savings may need to fund more of your spending. Withdrawals in this window deserve a close look. |
| Social Security | Benefits can start as early as 62. Full retirement age is 67 for anyone born in 1960 or later. Your claiming age affects your income floor. |
| Age 65 | Medicare eligibility generally begins. Your health coverage costs may change, and Medicare premiums can include an income-related surcharge (IRMAA) that is based on your tax return from two years earlier. |
| Age 73 or 75 | RMDs begin from traditional IRAs and most workplace plans. The starting age depends on your birth year. For people with large pre-tax balances, RMDs may cover much of their income needs, and they can also push income into a higher bracket. |
How Could Two Retirees With the Same Savings Face Different Choices?
Hypothetical example for illustration only. It is not a recommendation, and results vary by individual circumstances.
Imagine two retirees who each have $1.5 million saved.
Retiree A holds almost everything in a 401(k) that later becomes an IRA. Every dollar withdrawn is taxed as ordinary income, so there are fewer levers to pull. If a large expense is coming in three years, taking the money over two tax years rather than one may help manage the tax brackets. The income floor may look a lot like a pension: fairly steady and mostly funded by taxable withdrawals.
Retiree B holds a mix of traditional, Roth, brokerage, and cash accounts. That mix offers more choices about where each year's income comes from. More options do not automatically mean a better result. The outcome still depends on balances, future income, and how well the rules are understood.
Now add a wrinkle. Suppose Retiree B stops working in their early 60s and may qualify for income-based premium tax credits on Marketplace health insurance. They also have many years before RMDs begin, which makes Roth conversions worth studying. A plan might compare the value of the credits against the tax savings from converting, and consider covering spending from cash and brokerage accounts in the meantime so that taxable income stays lower. Credit eligibility rules change over time, so any decision like this has to be modeled with current rules. The same savings, split across different account types, can lead to a completely different planning scenario.
Frequently Asked Questions About Retirement Withdrawals
What is the best retirement withdrawal strategy?
There is no single best strategy. The right one depends on your age, your account types, your Social Security timing, any pension income, your spending needs, and your tax situation. A good plan is tested against your own projections and revisited as your circumstances change.
Which account should I withdraw from first in retirement?
A common rule of thumb is to draw from taxable accounts first, then tax-deferred accounts, then Roth accounts. That order can get flipped quickly depending on tax brackets, Medicare premiums, and your legacy goals, so it is worth modeling before you follow it.
Does the 4% rule still apply?
The 4% rule is a rule of thumb for an average withdrawal rate over the life of a plan. It does not apply to every year, and it is not a guarantee. Spending that is higher early on and lower later can still fit within a plan, depending on other income sources.
When do I have to start taking required minimum distributions?
RMDs from traditional IRAs and most workplace plans generally begin at age 73 or 75, depending on your birth year. Roth IRAs have no RMDs for the original owner. Missing an RMD can lead to a penalty, so confirm your start date and amount with your advisor or tax professional.
Can I retire before 59½ without penalties?
Possibly. Certain exceptions to the 10% additional tax exist, and holding some savings in taxable accounts can reduce your reliance on early withdrawals. The rules are detailed, so plan before you retire rather than after.
Where Do You Go From Here?
Withdrawal planning rarely comes down to one rule. It comes down to how your income, accounts, taxes, and goals fit together, and how that fit changes at each stage. If you would like to talk through your own situation, our team can help you build and stress-test a plan as part of our Retirement & Income Planning work. Schedule a conversation to get started.
You can also watch or listen to the full discussion in the Retire Right episode on withdrawal strategies.
Sources
- IRS, Retirement topics: Required minimum distributions (RMDs), reviewed November 2026.
- Congressional Research Service, Required Minimum Distribution (RMD) Rules for Original Owners, for the RMD starting age by birth year and Roth 401(k) rules effective 2024.
- IRS, Publication 590-B, for Roth IRA rules for original owners.
- IRS, Exceptions to tax on early distributions, reviewed November 2026.
- Social Security Administration, Retirement age and benefit reduction, reviewed November 2026.
- Medicare.gov, When can I sign up for Medicare?, reviewed November 2026.
- Social Security Administration, Handbook § 2504 (IRMAA), for the two-year income lookback.