Which Account First? The Withdrawal Order That Echoes for 30 Years

Taxes in Retirement

You saved into three kinds of accounts for forty years. Nobody ever told you the order you spend them matters.

It does. For a hypothetical couple retiring at 62 with $1.8M spread across a brokerage account, Traditional IRAs, and Roth IRAs (invented for illustration, not real clients), the gap between the best withdrawal sequence and the worst one runs well into six figures of lifetime tax. Same accounts. Same spending. Different order.

The textbook answer

Conventional wisdom says: spend the taxable brokerage first, the Traditional IRA second, the Roth last. Let the tax-advantaged accounts compound as long as possible.

It's not crazy. Taxable accounts are the least efficient to hold long-term, and Roth money is the most precious, so burning taxable first and Roth last has a logic to it.

It's also frequently wrong, and here's why: it ignores everything else your income touches.

What the textbook forgets

Follow the textbook and watch what happens to our couple. From 62 to 70 they live entirely off the brokerage account. Selling long-held positions generates capital gains, but with no other income, most of those gains fall in the 0% bracket. Their taxable income for eight straight years is nearly nothing. Delightful, right?

It's actually the problem. Those are the Golden Window years, and the textbook just spent them producing a 0% tax bill when they could have been FILLING the low brackets on purpose. Meanwhile the untouched Traditional IRAs compound from $900K toward $1.8M, and at 73 the RMD freight train arrives: forced six-figure withdrawals stacked on two Social Security checks, the tax torpedo firing at full effect, IRMAA surcharges on the Medicare premiums, and a bracket they haven't seen since their working years.

The textbook didn't lower their lifetime taxes. It rescheduled all of them into the worst possible decade, including, eventually, the surviving spouse's single-filer years.

The blended approach

What the better sequence looks like for most retirees isn't an order at all. It's a recipe, remixed every year:

Each year from retirement to RMDs, pull enough from the TRADITIONAL side to fill the low brackets, even if you don't need it all for spending (convert the excess to Roth). Top up actual spending from the taxable account, harvesting gains while they're in the 0% capital gains zone. Leave the Roth alone, not as a rule, but as a tool: it's the release valve you tap in any year when one more taxable dollar would cross an IRMAA cliff, fire the torpedo, or phase out the senior deduction.

The goal isn't minimizing THIS year's taxes. It's smoothing your taxable income across three decades so no single year ever spikes into the punishing zones. A flat 12-22% forever beats alternating between 0% and 32%, and it isn't close.

Why there's no universal answer

The right recipe depends on the ratio between your account types, your Social Security size and claiming age, your state, your heirs (Traditional IRAs are the worst asset to inherit, Roths the best, taxable gets a step-up), and your charitable plans (QCDs after 70 and a half can make the Traditional account the BEST giving asset, flipping the whole order).

Which is the honest reason this is the one piece of the puzzle I can't hand you as napkin math. A quick napkin check tells you if you are in the neighborhood. The mock 1040 tells you what one year costs. The withdrawal order is a 30-year optimization across all of it, and it's where a plan stops being a spreadsheet and starts being a strategy.

One thing to do this week regardless: log in and write down your three balances (taxable, Traditional, Roth) as percentages. If Traditional is over 70% of the total, the freight train is already scheduled, and every year before 73 is a chance to reroute it.

The order you spend it was always part of the plan. Now it's the part you know about.