The order in which you withdraw your money can significantly impact how long it lasts.
When you need cash in retirement, you cannot just pull it randomly from whichever account has the highest balance. Every account you own—whether it is a taxable brokerage account, a tax deferred 401(k), or a tax free Roth IRA—has different tax rules.
If you pull from the wrong account at the wrong time, you can accidentally push yourself into a higher tax bracket, trigger taxes on your Social Security benefits, or increase your Medicare premiums. The strategy of deciding which accounts to tap first, second, and third is called withdrawal sequencing, and it is critical to preserving your wealth.
The generic rule of thumb often says to spend down your taxable accounts first, let your tax deferred accounts grow, and touch your tax free Roth accounts last. But conventional wisdom does not apply to everyone.
Depending on your age, your income needs, and future tax laws, it might make sense to blend withdrawals from different accounts in the same year to manage your tax bracket efficiently. We look at the specific math of your situation to build a withdrawal sequence designed to keep your lifetime tax bill as low as possible.
Tax efficient withdrawals require ongoing management. We monitor your plan year over year, adjusting your withdrawal strategy as tax laws change and as you transition through different phases of retirement. Our goal is to help you keep more of your hard earned money working for you.