Tax-Efficient Withdrawal Order: Which Accounts to Tap First in Retirement

The conventional wisdom — drain your taxable brokerage first, then traditional IRA, leave Roth for last — lowers your tax bill in year one. Over a 30-year retirement, it often costs tens of thousands more. Here's why, and what to do instead.

The three buckets

Every withdrawal decision starts with how each account type is taxed on the way out.

Why the conventional rule gets taught

The standard advice — taxable first, tax-deferred second, Roth last — has a real logic. Brokerage withdrawals are taxed only on the gain, often at a 0% rate for retirees in lower brackets. Tax-deferred accounts keep compounding while untouched. Roth grows tax-free indefinitely, so leaving it alone is always "free" growth.

If you care only about minimizing this year's federal income tax, conventional ordering wins. The problem is that it optimizes for the next 12 months while quietly building a tax liability that erupts in your mid-70s — when Social Security, Required Minimum Distributions, and Medicare surcharges all collide at once.

Four traps the conventional rule walks you into

1. The RMD time bomb

Required Minimum Distributions are mandatory withdrawals from traditional IRAs and 401(k)s starting at age 73 (for those born 1951–1959) or 75 (born 1960 or later). The IRS doesn't ask whether you need the income — it forces a distribution calculated from your account balance divided by a life-expectancy factor from the Uniform Lifetime Table.¹

Leave a $950,000 IRA untouched from age 65 to 75, and it grows to approximately $1.70 million at 6% annual return. The RMD at 75 (divisor: 24.6) is $69,100 per year — a forced withdrawal whether or not you need the income. Add a $60,000 combined Social Security benefit and you're looking at over $120,000 in income that year, pushing into the 22% bracket and potentially into IRMAA territory for Medicare surcharges.

2. Social Security taxation makes each IRA dollar cost more than you think

Once Social Security benefits start, each additional dollar of IRA income doesn't just fill one dollar of your tax bracket — it can fill 1.85 dollars. The reason is provisional income.

The IRS calculates provisional income (AGI plus half your SS benefit) to determine what portion of your Social Security is taxable:²

• Provisional income below $32,000 (MFJ): Social Security is not taxable.
• $32,000–$44,000 (MFJ): Up to 50% of SS becomes taxable income.
• Above $44,000 (MFJ): Up to 85% of SS becomes taxable income.

In the 85% zone, each additional dollar of IRA withdrawal increases provisional income by $1 — and simultaneously causes 85 cents of previously non-taxed SS to become ordinary income. The effective marginal rate on that IRA dollar is therefore 1.85× the stated bracket rate. At the 12% rate, that's an effective 22%. At 22%, it's a 40% effective marginal rate.

The window before Social Security starts — before the provisional income trap exists — is when IRA withdrawals are cheapest. If you're delaying SS to 70 (a smart strategy for spousal benefits and longevity), you have a multi-year gap where every IRA dollar costs exactly what the bracket says, not 1.85× it.

3. IRMAA: Medicare's income cliff

Medicare Part B and Part D premiums include an income surcharge called IRMAA. For 2026, the first surcharge tier kicks in at MAGI above $109,000 for single filers or $218,000 for married filing jointly. Below those thresholds, the base Part B premium is $202.90 per person per month. Above the first tier, it rises to $284.10 — an extra $975 per year per person. Higher tiers add more, up to $689.90 per person per month at the top tier.³

IRMAA has a two-year lookback: your 2026 surcharges are based on 2024 income. That means a large Roth conversion, an unusually large IRA withdrawal, or a one-time capital gain this year won't appear in Medicare premiums until 2028 — useful, but also a trap if you forget to plan two years ahead. See our Roth conversion window guide for a detailed IRMAA walkthrough.

4. Missing the 0% capital gains window

Long-term capital gains are taxed at 0% for married filers with taxable income up to $98,900 in 2026.⁴ That's a meaningful opportunity to sell appreciated taxable positions — index funds, stocks held for years — with no federal capital gains tax at all.

But the 0% threshold applies to total taxable income, including ordinary income. If you're drawing $72,000 per year from a traditional IRA, your taxable income (after the $32,200 standard deduction) is already $39,800 — leaving just $59,100 of headroom before capital gains start costing money. Heavy IRA draws narrow this window or eliminate it entirely.

Coordinating IRA withdrawals with capital gains harvesting requires thinking across all account types simultaneously, not treating each bucket independently.

The optimized approach: income smoothing

The alternative isn't "Roth first" or "IRA first." It's income smoothing: drawing from accounts each year to keep taxable income at an efficient level across your entire retirement, rather than near zero early and very high in your 70s and 80s.

The key principle: you are likely facing a window right now where your income is low — between your last paycheck and Social Security; before RMDs begin. Every year you let that window pass without drawing on traditional accounts is a year you've chosen to defer a tax payment at a lower rate and pay it later at a higher one.

In practice: a married couple with $950K in a traditional IRA and no Social Security yet has a 12% bracket ceiling of $133,000 AGI ($100,800 taxable income + $32,200 standard deduction). If they spend $72,000 per year, the remaining $61,000 of bracket headroom can be used for Roth conversions — permanently moving that money into a tax-free account at 12 cents on the dollar, before future RMDs close the window.

Side-by-side: same portfolio, dramatically different outcomes

Both couples below start at age 65 (born 1961; RMD age: 75) with identical portfolios and identical spending needs. The only difference is withdrawal sequencing.

Illustrative. Assumes 6% annual portfolio return, $60K/year combined SS at 70, $72K/year spending, standard deduction taken, no state income tax. RMD divisor at 75: 24.6 (IRS Uniform Lifetime Table). Lifetime tax estimated through age 90.

Couple A paid almost nothing in taxes from 65–74 and a steep amount starting at 75. Couple B paid more earlier, at 12%, and almost nothing later. The difference — roughly $114,000 in lifetime federal taxes on a $1.5M starting portfolio — comes entirely from timing. Neither couple did anything exotic. One front-loaded cheap withdrawals; the other deferred them into a more expensive bracket.

Withdrawal headroom calculator

Use this tool to see how much more you can draw from your traditional IRA this year before hitting the 22% bracket, triggering IRMAA, or using up your 0% capital gains room.

Five practical rules

1. Fill your bracket in every low-income year. The years between retirement and Social Security + RMDs are your cheapest tax years. Withdraw from (or convert) traditional accounts enough to use the 12% bracket fully — don't leave cheap conversions on the table.
2. Model provisional income before claiming Social Security. Once SS starts, each IRA dollar costs up to 1.85× in the 85% provisional income zone. Map this interaction before your claim date, not after.
3. Set an IRMAA reminder two years out. Your 2028 Medicare surcharges are based on 2026 income. Large conversions or withdrawals this year will show up two years later. Plan the ceiling now.
4. Use Roth as a pressure valve, not a first resort. Reserve Roth for years when additional IRA income would cross a meaningful threshold — the 22% bracket, the IRMAA cliff, or the SS taxation jump at $44,000 provisional income.
5. Harvest 0% capital gains in low-income years. If taxable income is below $98,900 (MFJ, 2026), long-term gains are federally tax-free. Sell appreciated positions in those years. You can't bank this opportunity; once the income is higher, the window is gone for that year.

Sources

1. IRS — Required Minimum Distributions. RMD age rules under SECURE 2.0 §107: age 73 for born 1951–1959; age 75 for born 1960+. Uniform Lifetime Table divisors (e.g., 24.6 at age 75) in IRS Publication 590-B.
2. IRS Publication 915 — Social Security and Equivalent Railroad Retirement Benefits. IRC §86 provisional income thresholds: $32,000 / $44,000 MFJ for 50% / 85% SS taxation. These thresholds are statutory and have not been inflation-adjusted since 1993.
3. CMS — 2026 Medicare Parts B Premiums and Deductibles Fact Sheet. Base Part B: $202.90/month. First IRMAA tier (above $109,000 single / $218,000 MFJ): $284.10/month per person. Two-year income lookback applies.
4. Tax Foundation — 2026 Federal Tax Brackets. LTCG 0% threshold: taxable income up to $98,900 (MFJ). Ordinary income 12% bracket: up to $100,800 taxable income / ~$133,000 MAGI (MFJ). Standard deduction: $32,200 (MFJ). Source: IRS Rev. Proc. 2025-67.

Tax brackets and IRMAA thresholds are for the 2026 tax year per IRS Rev. Proc. 2025-67 and CMS. RMD ages per SECURE 2.0 (Pub. L. 117-328, enacted December 2022). Social Security taxation thresholds (IRC §86) are statutory and unchanged since 1993. All figures verified April 2026.