If you are approaching retirement with assets spread across a brokerage account, a 401(k) or IRA, a Roth, and possibly a health savings account, the question is not whether you have enough. It is which account you should spend from first. That sequencing decision, repeated every year for two or three decades, has a larger effect on your after-tax income than almost any single investment choice you will make.
The general answer is straightforward: draw from taxable accounts first, then tax-deferred accounts, then Roth accounts last. The order exists because it keeps your most heavily taxed dollars sheltered the longest and lets your tax-free dollars compound the most. For households with $1 million or more in investable assets, though, following that order without adjustment is frequently the more expensive path. Required minimum distributions, Medicare premium thresholds, and the years between retiring and claiming Social Security all create reasons to deliberately break the sequence.
This guide covers five aspects of building a retirement withdrawal strategy:
1. The default withdrawal order and the logic behind it
2. A tax treatment map of every account type you hold
3. When breaking the default order costs you less
4. How required minimum distributions reshape the sequence
5. Coordinating withdrawals with Social Security timing
Each of these is covered in detail below.
The Default Withdrawal Order and Why It Works
The conventional sequence, taxable to tax-deferred to Roth, is built on one idea: money that grows without annual tax drag should be left alone as long as possible. Your taxable brokerage account is already being taxed each year on dividends and realized gains, so spending from it costs you the least in future compounding. Your traditional IRA grows untaxed until withdrawal. Your Roth grows untaxed permanently, which makes it the most valuable dollar you own and the last one you should spend.
There is a second benefit that matters more at higher asset levels. Withdrawals from a taxable account are largely a return of your own principal, and the gain portion is taxed at long-term capital gains rates rather than ordinary income rates. In your first years of retirement, drawing from taxable accounts can produce a meaningful amount of spendable cash while keeping your reported ordinary income low, which is precisely the condition that makes several other planning moves possible.
Your Accounts, Their Tax Treatment, and When to Draw From Each
Before deciding on a sequence, it helps to see the full set of accounts side by side. Each one is taxed differently, and those differences are what create the planning opportunities described later in this guide.
| Account Type | Tax Treatment | When to Draw From It |
|---|---|---|
| Taxable brokerage and cash accounts | Only the gain is taxed. Long-term capital gains and qualified dividends are taxed at 0, 15, or 20 percent, well below ordinary income rates. Principal comes out tax free. | First, in most cases. Spending from here early keeps your tax-advantaged accounts compounding and holds your ordinary income low. |
| Traditional IRA and 401(k) | Every dollar withdrawn is taxed as ordinary income, at rates reaching 37 percent for 2026.1 Required minimum distributions eventually apply.2 | Second under the default order, but often earlier than that. These are the accounts to tap in low-income years and to shrink before RMDs begin. |
| Roth IRA and Roth 401(k) | Qualified withdrawals are entirely tax free, and neither account carries a lifetime required minimum distribution.2 | Last, in most cases. Reserve these for high-income years, large one-time expenses, and assets you intend to leave to heirs. |
| Health savings account | Contributions, growth, and withdrawals for qualified medical costs are all tax free. After age 65, other withdrawals are taxed as ordinary income without a penalty. | Later, and ideally against medical and long-term care costs, which tend to concentrate in the back half of retirement. |
| Cash reserve | No tax on principal. Interest is taxed as ordinary income in the year it is earned. | During market declines, so that a down year does not force you to sell depressed assets to cover living expenses. |
Each account type carries a distinct tax treatment, which is what determines where it belongs in your withdrawal sequence.
When to Break the Default Order
The default order optimizes for deferral. It does not optimize for your lifetime tax bill, and for households with substantial pre-tax balances, those two goals point in different directions. Three situations are worth watching for.
Low-Income Years Between Retiring and Claiming Benefits
If you retire at 62 and delay Social Security to 70, you may have eight years with unusually low taxable income. For 2026, a married couple filing jointly stays in the 12 percent bracket up to $100,800 of taxable income and in the 22 percent bracket up to $211,400.1 Spending only from taxable accounts during those years leaves a large amount of low-bracket space unused, and that space does not carry forward. Drawing from your traditional IRA to intentionally fill the 12 or 22 percent bracket, even though you do not need the cash, converts future 32 or 35 percent dollars into present 22 percent dollars.
Partial Roth Conversions
The same window supports partial Roth conversions, where you move a measured amount from a traditional IRA to a Roth and pay the tax now. The amount converted is capped by the bracket you are trying to stay within, which is why conversions are best executed as a multi-year sequence rather than a single large transaction. Conversions also reduce the balance that will eventually drive your required minimum distributions, which compounds the benefit.
Large One-Time Expenses
A new roof, a down payment on a second home, or a significant gift to a family member can push a single year of ordinary income into a much higher bracket if funded entirely from a traditional IRA. This is one of the clearest cases for drawing from a Roth out of order. The withdrawal is tax free, it does not appear in your adjusted gross income, and it does not affect the thresholds discussed below.
How Required Minimum Distributions Reshape the Sequence
Required minimum distributions are the reason deferral cannot be the only objective. Under SECURE 2.0, the applicable age is 73 for individuals born between 1951 and 1959, and 75 for those born in 1960 or later.2 Roth IRAs have never carried a lifetime RMD, and as of the 2024 tax year, Roth 401(k) accounts no longer do either.3
The risk is arithmetic. A couple who defers every pre-tax dollar until 75 may arrive at that age with a balance large enough that the required distribution alone exceeds their actual spending needs, arrives as fully taxable ordinary income, stacks on top of Social Security, and pushes them into a higher bracket than they occupied while working. Nothing about that outcome is avoidable once you reach it. It is only avoidable in the fifteen or so years before it, by deliberately drawing down or converting pre-tax balances while your bracket is still low.
Coordinating Withdrawals With Social Security Timing
Delaying Social Security past your full retirement age increases your benefit by roughly 8 percent per year until age 70, which makes deferral attractive for households who can fund the gap from their portfolio. The funding decision and the claiming decision are the same decision, and they should be made together.
Once benefits begin, they interact with your withdrawals. Up to 85 percent of Social Security benefits become taxable once provisional income exceeds $34,000 for single filers or $44,000 for joint filers, thresholds that have not been adjusted for inflation since they were set.4 For most households at this asset level, those thresholds will be exceeded regardless of sequencing, so the planning value is not in avoiding benefit taxation. It is in recognizing that every traditional IRA dollar you withdraw after claiming carries a higher effective cost than the same dollar withdrawn before, because it increases both your ordinary income and the taxable share of your benefit.
Managing Your Tax Bracket Year to Year
Sequencing is best understood as a series of annual decisions about how much ordinary income to report, not a fixed rule applied once. Several thresholds are worth planning around.
Medicare surcharges. The income-related monthly adjustment amount applies in 2026 to modified adjusted gross income above $109,000 for single filers and $218,000 for joint filers, and it operates as a cliff rather than a phase-in.5 Crossing a threshold by a small amount triggers the full surcharge for the year. Because Medicare looks at your return from two years prior, the conversion you execute this year determines the premium you pay two years from now.
Capital gains stacking. Long-term gains are taxed at 0, 15, or 20 percent depending on where they land on top of your ordinary income. Ordinary income withdrawals from a traditional IRA raise the base that gains stack onto, which means a large IRA distribution can increase the tax rate on gains you realize in the same year.
State treatment. For clients in the Greater Cincinnati and Northern Kentucky area, the state side favors retirees on both sides of the river. Ohio deducts Social Security benefits in full from state taxable income and taxes other retirement distributions at a flat 2.75 percent for 2026.6 Kentucky also exempts Social Security, excludes $31,110 per person of other retirement distributions, and applies a flat 3.5 percent rate for 2026.7 Neither state changes the federal sequencing logic, but both affect the after-tax result of a given withdrawal.
Where a Fiduciary Advisor Adds Measurable Value
Withdrawal sequencing is one of the few areas of planning where the value of advice can be quantified with reasonable precision. The comparison is not a market forecast. It is the difference between the tax you would pay following a default order and the tax you would pay under a coordinated multi-year plan, and it can be modeled directly.
At Journey Advisory Group, we build that model as part of the planning relationship rather than as a separate engagement. With access to an in-house CPA for the more complex cases, the conversion amount, the bracket target, the Medicare threshold, and the claiming date are evaluated as one set of tradeoffs instead of being split across separate advisors who each see part of the picture. As a fiduciary, we are obligated to recommend the sequence that serves your circumstances, including the years when the right answer is to withdraw more than you need and pay tax earlier than you would prefer.
For a broader view of how sequencing fits within a complete income plan, see our guide to retirement income planning. For a closer look at the claiming decision itself, see our analysis of Social Security timing.
Schedule a Consultation with Journey Advisory Group
If you would like to see what a coordinated withdrawal strategy could look like for your own accounts, we welcome the conversation. Contact us at info@JourneyAdvisory.Group or call 800-749-7143. You can also visit JourneyAdvisory.Group to schedule a consultation with our team.
Disclosure
This material prepared by Journey Advisory Group, LLC is for informational purposes only. It is not intended to serve as a substitute for personalized financial, investment, tax, or legal advice, or as a recommendation or solicitation of any particular strategy or product. Facts presented have been obtained from sources believed to be reliable. Journey Advisory Group, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.
SEC Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the advisor has attained a particular level of skill or ability. Tax rates, contribution limits, distribution ages, and income thresholds referenced in this material reflect published figures as of the date of writing and are subject to legislative and regulatory change. Withdrawal sequencing, Roth conversion, and Social Security claiming strategies involve considerations specific to each individual’s circumstances and should be reviewed with a qualified tax or legal professional as applicable. Journey Advisory Group does not provide legal advice.
Journey Advisory Group is a fee-based advisory firm and SEC-registered Registered Investment Adviser (RIA). Additional information about Journey Advisory Group’s services, fees, and potential conflicts of interest is available in Form ADV Parts 2A and 2B, which can be obtained through the SEC’s Investment Adviser Public Disclosure website at adviserinfo.sec.gov or by contacting the firm directly.
JAG does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
References
1. Internal Revenue Service. "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill." irs.gov. Revenue Procedure 2025-32. Accessed August 2026.
2. Congressional Research Service. "Required Minimum Distribution Rules for Original Owners of Retirement Accounts." congress.gov, IF12750. Accessed August 2026.
3. Internal Revenue Service. "Required Minimum Distributions." 89 Federal Register 58886, July 19, 2024.
4. Internal Revenue Service. "Publication 915: Social Security and Equivalent Railroad Retirement Benefits." irs.gov. Accessed August 2026.
5. Centers for Medicare and Medicaid Services. "2026 Medicare Parts A and B Premiums and Deductibles." cms.gov. Published November 2025.
6. Ohio Department of Taxation. "Income Taxes: Individual Income Tax Rates and Retirement Income." tax.ohio.gov. Accessed August 2026.
7. Kentucky Department of Revenue. "Individual Income Tax." revenue.ky.gov. Accessed August 2026.