From Kiplinger · · 1m
Tax-Smart Retirement Withdrawal Strategy
Which accounts should clients tap first for tax-efficient retirement income?
In brief
Which accounts should clients tap first for tax-efficient retirement income? Clients should prioritize tax-deferred accounts before taxable or Roth accounts to avoid higher taxes and Medicare premiums later. Originally reported by Kiplinger.
Retirement income planning
Retirement income planning requires intentional strategy, not quick decisions, to avoid costly tax consequences later.
Tax-deferred accounts
Tax-deferred accounts like IRAs and 401(k)s are key retirement income sources but may lead to higher taxes later.
Tax-free accounts
Tax-free Roth IRAs allow proactive tax management but require careful timing to avoid RMDs.
Taxable accounts
Taxable brokerage accounts can be used strategically to manage tax exposure before required minimum distributions begin.
Sequence of return risk
Withdrawing during market declines can increase tax burdens and Medicare premiums, so clients need a buffer for market volatility.
Strategic withdrawal order
Clients should tap tax-deferred accounts first to avoid higher taxes and Medicare premiums later in retirement.
The bottom line
Clients should prioritize tax-deferred accounts before taxable or Roth accounts to avoid higher taxes and Medicare premiums later.
