Which Account Do You Draw From First? Rethinking Retirement Withdrawal Order

Most retirees are taught a simple rule: spend your taxable brokerage accounts first, then your tax-deferred accounts (traditional IRAs and 401(k)s), and save your Roth accounts for last. It's an easy rule to remember, and it isn't wrong exactly, but it's often incomplete. For many retirees, following it rigidly year after year can mean paying more in lifetime taxes than necessary, triggering higher Medicare premiums, or creating an unpleasant tax surprise once Required Minimum Distributions (RMDs) begin.

A more strategic approach looks at withdrawal order not as a fixed sequence, but as a series of yearly decisions, sometimes called tax bracket management or proportional withdrawal strategy. The goal isn't to avoid taxes entirely (that isn't possible), but to manage when and how much you recognize in taxable income, year by year, across a retirement that could last three decades or more.

• The traditional taxable-then-deferred-then-Roth order is a reasonable default, but it isn't automatically optimal for everyone.
• Blending withdrawals across account types each year can help smooth taxable income and avoid bracket spikes.
• Required Minimum Distributions (RMDs) and Social Security timing both interact with withdrawal strategy and deserve coordinated planning.
• Medicare's Income-Related Monthly Adjustment Amount (IRMAA) can penalize a single high-income year, even if it's a one-time event.
• There is no one-size-fits-all answer. The right sequence depends on your account mix, income needs, health, and family goals.

The conventional wisdom follows a logical thread: spend taxable accounts first because they've often already been taxed on growth, let tax-deferred accounts continue growing tax-deferred as long as possible, and let Roth accounts (which are tax-free on qualified withdrawals) grow untouched the longest since they have no lifetime RMDs for the original owner.

The problem is that this approach can create a large, low-taxable-income period in the early retirement years followed by a sudden jump once RMDs begin (currently required starting at age 73 for many retirees, per current IRS RMD guidance). If a large tax-deferred balance has been left untouched and compounding for a decade, the eventual RMDs may push you into a higher bracket than you would have faced by spreading withdrawals out earlier. In other words, strictly deferring taxable income now can sometimes mean a bigger tax bill later.

Instead of draining one account type completely before touching the next, a bracket management approach asks a different question each year: how much taxable income can we recognize this year while staying within a reasonable bracket, and how do we fill that space efficiently?

This might mean:

• Taking some withdrawals from a traditional IRA even while taxable accounts still have a balance, intentionally "filling up" a lower bracket in early retirement years before Social Security and RMDs increase income later.
• Doing partial Roth conversions in lower-income years to shift future RMD-generating balances into tax-free Roth accounts, spreading the tax cost over multiple years rather than concentrating it.
• Reserving Roth withdrawals for years when taxable income is already elevated (a big one-time expense, a large capital gain, etc.), since qualified Roth withdrawals don't add to taxable income.

The underlying idea is proportionality: rather than a strict sequence, you're managing a blended mix each year based on where your income currently sits relative to key thresholds. We don't recommend specific bracket targets here since these thresholds and rules change and are highly personal, but the IRS provides current tax rate schedules that should be reviewed annually as part of this kind of planning.

When you claim Social Security changes your taxable income picture for the rest of retirement. Delaying Social Security (up to age 70) often means relying more heavily on portfolio withdrawals in the early retirement years, which can actually create an opportunity: those "gap years" between retirement and claiming Social Security may be some of the lowest-income years you'll have, making them ideal candidates for Roth conversions or intentional traditional IRA withdrawals. The Social Security Administration outlines how claiming age affects benefit amounts, and coordinating that decision with your withdrawal strategy, rather than treating them as separate choices, is where a lot of value can be found.

Two forces can quietly work against retirees who don't plan ahead:

RMDs. Once you reach the age at which the IRS requires minimum distributions from tax-deferred accounts, you must withdraw whether you need the income or not. If those balances have grown large, the resulting income can push you into a higher bracket and increase the taxable portion of your Social Security benefit.

IRMAA. Medicare Part B and Part D premiums are adjusted upward for higher-income beneficiaries under the IRMAA rules described by Medicare.gov. Because IRMAA is based on income from two years prior, a single large withdrawal or Roth conversion can trigger higher premiums in a future year, sometimes as a surprise. This is one of the strongest arguments for spreading taxable withdrawals and conversions across multiple years rather than concentrating them.

• Assuming the taxable-then-deferred-then-Roth order applies automatically without reviewing your specific account balances and income needs.
• Ignoring the "gap years" before Social Security and RMDs begin, when taxable income may be unusually low and conversion opportunities may be more favorable.
• Doing a large Roth conversion in a single year without checking the potential IRMAA impact two years later.
• Failing to coordinate withdrawal decisions with a tax professional who can see the full picture across investment and tax planning.

Every retiree's account mix, income needs, and family goals are different, and the right withdrawal strategy for one household may not fit another. At Cannon Advisors, we believe a properly structured financial plan connects the dots between your investment accounts and your tax situation rather than treating them as separate silos. Working alongside Cannon Tax & Accounting, we help clients build a personalized, year-by-year withdrawal strategy that considers account types, Social Security timing, RMDs, and Medicare costs together. If you're approaching retirement or already there and want a second look at your withdrawal order, schedule an introductory consultation with us to talk through your specific situation.

Is the taxable-then-tax-deferred-then-Roth order ever the right approach? It can be a reasonable starting point for some retirees, particularly those with modest tax-deferred balances where future RMDs are unlikely to create a large tax spike. It simply shouldn't be applied automatically without review.

What is a Roth conversion? A Roth conversion involves moving funds from a traditional IRA (taxable upon conversion) into a Roth IRA, where future qualified withdrawals are tax-free. It's one tool used in bracket management strategies, discussed further in the IRS Roth IRA guidance.

When do RMDs start? Current IRS rules set the RMD starting age based on your birth year; refer to the IRS's RMD FAQ page for the applicable age in your situation.

What is IRMAA and how is it calculated? IRMAA is an income-based surcharge on Medicare Part B and Part D premiums. It's based on your modified adjusted gross income from two years prior, as described on Medicare.gov.

Does delaying Social Security always make sense? Not necessarily. It depends on health, other income sources, and how the delay affects your overall withdrawal strategy. The Social Security Administration's planner tools can help illustrate the tradeoffs, but a personalized plan should factor in your full financial picture.

Can a bad withdrawal order actually cost me money? Yes. Poor sequencing can result in paying taxes at higher rates than necessary over your lifetime, triggering unnecessary IRMAA surcharges, or increasing the taxable portion of Social Security benefits. The effects compound over a long retirement.

Should I do all my Roth conversions at once? Generally, spreading conversions across multiple years is used to avoid pushing income into higher brackets or triggering IRMAA surcharges in a single year, though the right pace depends on your personal numbers.

Do taxable brokerage account withdrawals count as ordinary income? Withdrawals of principal generally are not taxed, but any realized capital gains are taxed under capital gains rules, which differ from ordinary income tax rates. A tax professional can help you understand the specific treatment of your holdings.

How often should I revisit my withdrawal strategy? Annually, at minimum, since income needs, tax law, and account balances change each year. Major life events (health changes, large expenses, market swings) may also warrant a mid-year review.

Who should I talk to about coordinating withdrawals and tax planning? A financial planning professional working alongside a tax professional can help ensure your investment and tax strategies aren't operating independently of each other, an approach we prioritize by pairing services between Cannon Advisors and Cannon Tax & Accounting.

• IRS, Retirement Plans FAQs Regarding Required Minimum Distributions
• IRS, Federal Income Tax Rates and Brackets
• IRS, Roth IRAs
• Social Security Administration, How Delayed Retirement Affects Your Benefits
• Medicare.gov, Costs for Medicare Part B and Part D When You Have a Higher Income (IRMAA)