Which Retirement Account to Draw From First: A Tax Bracket Strategy

The Conventional Withdrawal Order and Why It Falls Short

Financial planning textbooks have long taught the conventional withdrawal order: draw from taxable accounts first, tax-deferred accounts second, and tax-free accounts last. The logic is sound in isolation - letting Roth accounts compound tax-free the longest maximizes the value of tax-free growth. But in practice, the conventional order can lead to a predictable problem: by the time you reach age 73 and Required Minimum Distributions begin, your untouched traditional IRA or 401(k) has been growing tax-deferred for a decade of retirement. The balance is larger. The RMDs are larger. The mandatory taxable income is larger. And the tax bracket impact can be severe. Consider a couple who retires at 62 with $600,000 in a traditional IRA and $300,000 in a Roth IRA. Following the conventional order, they spend from taxable accounts and defer the traditional IRA entirely for 11 years. At age 73, the traditional IRA has grown at 6% per year to approximately $1,139,000. The first-year RMD on $1,139,000 is roughly $43,000. Combined with $45,000 in Social Security and $15,000 in pension income, their gross income is $103,000 - firmly in the IRMAA-triggering zone and with 85% of Social Security taxable. If the same couple had made strategic Roth conversions or partial IRA withdrawals during the low-income years from 62 to 72, they could have converted $50,000 to $70,000 per year at the 12% or 22% tax rate, dramatically reducing the traditional IRA balance - and the RMDs it generates. The tax paid during those conversion years is smaller than the tax saved on the reduced future RMDs.

The Low-Income Window Between Retirement and RMDs

The years between retirement and age 73 are the highest-leverage window in retirement tax planning. During these years, earned income has stopped. Social Security may not have started yet if you are deferring it to maximize benefits. RMDs have not begun. The result is often the lowest-income period a person will experience in their adult life. For a couple who retires at 62 with $1 million in a traditional IRA and no other income except modest taxable investment returns, their taxable income might be $25,000 to $35,000 per year during those 11 years. The 2026 standard deduction for married filers is $32,200. After that deduction, income in the 10% bracket extends to $24,800, and income in the 12% bracket extends to $100,800. This is an extraordinary opportunity to recognize income at historically low rates and convert it to permanent tax-free status. Converting $60,000 to $70,000 per year from a traditional IRA to Roth during 11 years between retirement and RMD start eliminates $660,000 to $770,000 of future mandatory taxable income - all at rates of 10-22%. The future RMDs on that converted amount disappear. The future Social Security taxes triggered by those RMDs disappear. The future IRMAA surcharges triggered by the higher income disappear. The calculus is simple: pay tax now at known lower rates rather than later at unknown higher rates on growing mandatory distributions. Every year the conversion window sits unused is a year of opportunity that cannot be recovered.

Dynamic Withdrawal Beats Static Rules

The optimal withdrawal strategy is not a fixed rule applied mechanically every year. It is a dynamic, annual assessment of the current-year income picture. Each year in retirement, the optimal approach involves three steps. First, identify all sources of income that will arrive regardless of your choices: pension payments, Social Security, any annuity income, and RMDs once they begin. Second, calculate how much additional income you can recognize before crossing the next significant threshold - the top of the 22% bracket, an IRMAA tier, or the point where 85% of Social Security becomes taxable. Third, fill that space from whichever account produces the best outcome: Roth conversions to reduce future RMDs, strategic IRA withdrawals to use low-bracket space, or tax-loss harvesting in taxable accounts to offset gains. This approach requires annual review rather than a set-and-forget strategy. Tax law changes, Social Security COLA increases, market returns, and changing personal circumstances all affect the optimal withdrawal amounts each year. The retiree who reviews their income picture in November each year, makes strategic IRA withdrawals or conversions to fill available bracket space, and adjusts the following year based on results will consistently outperform the one who follows a static formula. Research suggests that dynamic withdrawal strategies, which actively manage the annual income picture across account types, can reduce lifetime taxes by $50,000 to $200,000 compared to mechanical withdrawal rules for a couple with a $1 million to $2 million retirement portfolio.

Using Roth Withdrawals to Stay Under Key Thresholds

The three tax thresholds most retirees need to manage are: the Social Security provisional income limit ($44,000 combined income for married couples above which 85% of SS is taxable), the first IRMAA tier ($218,000 MAGI for married filers in 2026), and the top of the 12% federal tax bracket ($100,800 taxable income for married filers in 2026). Roth account withdrawals do not count toward any of these calculations. They are not included in adjusted gross income, not counted in the combined income formula for Social Security taxation, and not included in MAGI for IRMAA. A retiree who draws $30,000 from a Roth IRA to cover living expenses keeps those $30,000 completely outside the tax calculations that trigger surcharges and additional SS taxes. The practical value of Roth flexibility is highest precisely when other income is pushing against a threshold. A retiree with $43,500 in combined income - just under the 85% Social Security taxation threshold for married couples at $44,000 - can cover an unexpected $5,000 expense by withdrawing from a Roth rather than a traditional IRA. The Roth withdrawal keeps combined income at $43,500. A traditional IRA withdrawal of $5,000 pushes combined income to $48,500, triggering 85% SS taxation on an additional $4,500 of benefits - adding roughly $990 in federal tax. The Roth flexibility saves that $990 from a single decision. Multiplied across dozens of such decisions over 25 years of retirement, the value of maintaining Roth balances for flexible withdrawal management is substantial and growing.