How to Structure Retirement Income From Multiple Accounts

Key takeaways

• Traditional IRAs and 401(k)s defer tax until withdrawal and are subject to RMDs starting at 73; Roth accounts are funded with after-tax money, generally grow tax-free, and carry no RMDs for the original owner.
• Taxable brokerage accounts are taxed on gains, not the full balance, with long-term capital gains rates of 0%, 15%, or 20% depending on income.
• Claiming Social Security before your full retirement age permanently reduces your benefit; delaying past full retirement age increases it by 8% a year up to age 70.
• Social Security benefits become partly taxable once combined income exceeds $25,000 (single) or $32,000 (married filing jointly), which withdrawals from other accounts can trigger.
• QCDs let those 70½ and older send IRA money directly to charity, up to $108,000 in 2025, while counting toward their RMD.

If you're staring at a 401(k) statement, an old IRA, maybe a Roth account, a brokerage account, and a Social Security estimate, and wondering which one you're supposed to touch first, you're asking the right question. Most people never get a straight answer to it. They get a pile of account statements and a vague sense that taxes are involved somewhere.

That patchwork of accounts is normal. It's also where a lot of retirees lose money they didn't have to lose, not through bad investments, but through withdrawal decisions that trigger avoidable taxes. This article answers the questions people ask when they sit down and look at their accounts side by side such as, does the order matter, how is each one taxed, when does Social Security fit in, and what happens when the government eventually forces your hand.

Does it really matter which account I pull from first?

Yes, and more than most people expect. Retirement accounts aren't interchangeable dollars. A dollar in a traditional IRA is taxed as ordinary income when you withdraw it. A dollar in a Roth IRA is generally tax-free. A dollar in a taxable brokerage account might trigger capital gains tax, or might not, depending on your income and how long you held the investment. Draw from the wrong account at the wrong time, and you can push yourself into a higher tax bracket, trigger a bigger tax bill on your Social Security benefits, or create a Medicare premium surcharge you didn't see coming.

That doesn't mean there's a single "correct" order to memorize and follow blindly. Your mix of accounts, your income needs, and your age all change the decisions you’ll make. What it does mean is that understanding how each account is taxed, and what its rules force you to do and when, is what makes it possible to make an informed choice.

If I have a 401(k) or traditional IRA, what happens when I take the money out?

You get taxed, in most cases at your full ordinary income rate. With a traditional IRA or 401(k), contributions may have reduced your taxable income in the year you made them, and the money grew without being taxed year to year. The bill comes due when you withdraw it. Any deductible contributions and the earnings on them are taxed as ordinary income when distributed, and if you withdraw before age 59½, you generally owe an additional 10% tax on top of that unless you qualify for a specific exception⁽¹⁾.

For a 401(k) specifically, the mechanism works a little differently on the front end.

Your elective salary deferrals are excluded from your taxable income as you contribute, unless you've chosen a Roth 401(k) option, your employer can also contribute, and everything is taxed as ordinary income when it comes out in retirement⁽²⁾.

These are also the accounts subject to required minimum distributions starting at age 73, which we'll get to below. That's the tradeoff built into the account. You get the upfront tax break and decades of deferred growth, but the government eventually requires you to start withdrawing, and it taxes what you take out.

Here’s a hypothetical example. Consider a fictional retiree, "Mark," age 68, with $650,000 in a traditional 401(k) rolled into an IRA. Every dollar Mark pulls from that account is taxed at his ordinary income rate for the year. If he takes a $40,000 distribution in a year when he has little other income, most of it may land in relatively low tax brackets. If he takes the same $40,000 in a year when he also sells an investment property, it stacks on top of that investment property income and could push some of the distribution into a higher bracket. Mark's situation is fictional. The tax mechanics described are accurate, but the numbers are not a projection for any real person and are illustrative only.

Is my Roth account really tax-free, or is there a catch?

For qualified withdrawals, it's genuinely tax-free. Roth accounts flip the traditional order. You contribute after-tax dollars, so there's no upfront deduction, but qualified withdrawals in retirement are not taxed at all⁽¹⁾. The catch, such as it is, is the word "qualified." To count as a qualified distribution, the withdrawal generally has to satisfy the account's 5-year holding requirement and meet one of a handful of conditions, most commonly that you're at least 59½⁽³⁾.

Roth IRAs have another advantage that's easy to overlook, which is that the original owner is never required to take RMDs from a Roth IRA during their lifetime⁽¹⁾. That makes a Roth account a useful tool for controlling your taxable income later in retirement, since you can choose whether to draw from it in a given year rather than being forced to.

Here’s a hypothetical example. "Elena," a fictional 70-year-old retiree, has $180,000 in a Roth IRA alongside her traditional accounts. In a year when she needs an extra $15,000 for a home repair, pulling it from the Roth account doesn't add a dollar to her taxable income and doesn't affect the taxability of her Social Security benefits. Pulling the same amount from her traditional IRA would. Elena is a fictional example used to illustrate the mechanics, not a real client or a specific outcome.

What about the money sitting in a regular brokerage account?

That money already got taxed once, so you're not taxed again on your original investment when you sell. What you're taxed on is the gain, and how that gain is taxed depends on how long you held the investment. Assets held more than one year qualify for long-term capital gains rates, which for 2025 are 0%, 15%, or 20% depending on your total taxable income. Assets held one year or less are taxed as ordinary income at your regular rate⁽⁴⁾.

Here's the part that surprises people, as of 2025, the 0% long-term capital gains rate applies if your taxable income is at or below $48,350 (single) or $96,700 (married filing jointly). The 15% rate applies up to $533,400 (single) or $600,050 (married filing jointly), and the 20% rate applies above those thresholds⁽⁴⁾.

That 0% bracket is wider than many people assume, and it's one reason taxable brokerage accounts are often a useful early-retirement funding source before other income sources kick in.

Here’s a hypothetical example. "James and Carol," a fictional married couple both in their early 60s, have $300,000 in a taxable brokerage account with substantial long-term gains and modest other income before Social Security starts. Because their taxable income falls under the $96,700 threshold, gains they realize from selling investments in that account could fall entirely within the 0% long-term capital gains bracket in a given year. Keep in mind this is an illustration of how the bracket works, not a claim about any specific couple's tax outcome.

Should I claim Social Security as soon as I can, or wait?

That depends on how you weigh a smaller check for longer against a bigger check for less time, but the mechanics are fixed and worth knowing before you decide. You can start retirement benefits as early as age 62, but claiming before your full retirement age permanently reduces your monthly benefit. Full retirement age is 66 for people born 1943 through 1954, rising gradually to 67 for anyone born in 1960 or later. If your full retirement age is 67 and you claim at 62, your benefit is reduced by roughly 30% for life⁽⁵⁾. On the other end, delaying benefits past full retirement age increases your monthly amount by 8% for each year you wait, up until age 70, when the increase stops⁽⁶⁾.

Is my Social Security check going to get taxed too?

Possibly, and this is the part most people don't see coming until they're already retired. Social Security isn't automatically tax-free. Whether your benefits are taxable depends on your combined income, meaning half of your Social Security benefit plus all your other income, including tax-exempt interest. If that combined total exceeds $25,000 for a single filer or $32,000 for a married couple filing jointly, part of your benefit becomes taxable⁽⁷⁾. This is exactly where account coordination matters, because a large withdrawal from a traditional IRA in the same year you're collecting Social Security can push more of your benefit into taxable territory, on top of the tax on the withdrawal itself.

Here’s a hypothetical example. "Diane," a fictional 63-year-old, is deciding whether to claim Social Security now or wait. If she waits until 67, her full retirement age, she avoids the early-claiming reduction entirely. If she waits until 70, her eventual monthly benefit would be roughly 24% higher than at 67 under the 8%-per-year delayed credit. In the meantime, she'd need to cover living expenses from her other accounts. Diane's numbers are illustrative only and don't reflect an actual benefit calculation.

What happens when I'm forced to start taking money out, whether I want to or not?

This is required minimum distributions (aka ‘RMD’), and it's less optional than almost anything else in retirement planning. Traditional IRAs, traditional 401(k)s, and similar tax-deferred accounts come with a deadline. You generally must begin taking required minimum distributions the year you turn 73, with your first RMD allowed to be delayed until April 1 of the following year⁽⁸⁾. Miss an RMD, or take less than required, and the shortfall can be hit with an excise tax of 25%, reduced to 10% if you correct it within two years⁽⁸⁾.

Roth IRAs are exempt from RMDs during the original owner's lifetime⁽¹⁾.

Employer plans, including 401(k)s, generally follow the same age-73 rule as IRAs, though some plans let you delay RMDs until the year you retire if you're still working past 73 and aren't a 5% owner of the business⁽⁹⁾.

Why does this matter for sequencing decisions made years earlier? Because RMDs aren't optional once they start. If you've been drawing down a traditional account faster than required in your early retirement years to manage your tax bracket, you may reach 73 with a smaller required minimum distribution than someone who left it untouched. If you've been avoiding it entirely, your first RMD could be a larger, less controllable addition to your taxable income right when Social Security and Medicare premiums are also in the picture.

So which account should I draw from first?

There's a commonly discussed answer, but it's a starting point, not a formula you can set and forget. The typical approach is to draw from taxable brokerage accounts first, tax-deferred accounts (traditional IRA and 401(k)) next, and Roth accounts last. The logic is that taxable accounts are often taxed at lower capital gains rates and give tax-deferred accounts more time to grow before RMDs force withdrawals, while Roth accounts, with no RMDs and no tax on qualified withdrawals, are held back as a flexible source for later or for managing tax brackets in specific years.

That said, treating this order as a rule rather than a starting point can backfire. Someone who depletes their taxable account entirely before touching tax-deferred money may arrive at 73 with an unusually large traditional balance, producing a bigger RMD than they'd like. Someone in an unusually low-income year might benefit from pulling more from a traditional account precisely because they're in a lower bracket than they expect to be in later.

The right sequence in any given year depends on your income for that year, upcoming RMDs, whether you're claiming Social Security yet, and whether a large withdrawal would push you across a capital gains threshold or a Social Security taxability threshold.

I give to charity. Is there a smarter way to do that from my IRA?

If you're 70½ or older, yes. A qualified charitable distribution (QCD) lets you transfer money directly from an IRA to a qualifying charity, up to $108,000 for 2025, without that amount counting as taxable income⁽³⁾. A QCD also counts toward satisfying your RMD for the year, which makes it a way to reduce your taxable income while meeting a distribution requirement you'd have to satisfy anyway⁽³⁾. The transfer has to go directly from the IRA trustee to the charity; money you withdraw yourself and then donate doesn't qualify for this treatment.

Could a big withdrawal accidentally cost me more later?

Yes, through a channel most people don't think to check, which is Medicare premiums. Medicare Part B and Part D premiums can increase if your income is higher⁽¹⁰⁾, a surcharge referred to as an Income-Related Monthly Adjustment Amount, or IRMAA⁽¹¹⁾. A large one-time withdrawal, whether it's a Roth conversion, a big traditional IRA distribution, or a large capital gain, can raise your income enough in a given year to trigger a higher premium down the road. If your income later drops because of a specific life-changing event, such as marriage, divorce, the death of a spouse, or a loss of income, you can ask Social Security to reconsider the surcharge, but that's a correction after the fact rather than something you can plan around in advance⁽¹¹⁾. It's one more argument for spreading large distributions across years where possible rather than taking them all at once.

What trips people up the most?

Assuming all withdrawals cost the same. Retirees sometimes treat a dollar as a dollar. A dollar from a Roth account, a dollar from a taxable brokerage account with long-term gains, and a dollar from a traditional IRA can have three very different after-tax values depending on your bracket that year.

Waiting until 73 to think about required minimum distributions. By the time your first required distribution arrives, the size of your tax-deferred balance is largely locked in. Decisions made in your 60s about how much to draw down or convert can meaningfully change what that first RMD looks like.

Not accounting for Social Security taxability. A withdrawal that seems reasonable on its own can have a second effect, which is pushing more of your Social Security benefit into taxable territory once combined income crosses the $25,000 or $32,000 threshold⁽⁷⁾.

Where do I go from here?

There's no single withdrawal order that works for everyone, because the right answer depends on your specific mix of accounts, your age, and your income needs in a given year. Running the numbers for your own situation, ideally before RMDs or Social Security claiming decisions are locked in, is where a tax professional or financial advisor earns their keep.

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Nothing on this site constitutes investment advice. All investors are encouraged to conduct their own research, and consult a qualified tax or financial professional, before making any investment or withdrawal decision. Past performance is not a guarantee of future results.

As of August 2026. Figures reflect 2025 and 2026 IRS and Social Security Administration data where cited and are subject to change annually. Names and financial details in the examples above are entirely fictional and used for illustration only.

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