In What Order Should You Spend Down Your Retirement Accounts?

Rob Berger
Rob Berger
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Published 2024-02-22
In this video, we'll discuss how to optimize the tax efficiency of your retirement withdrawals. New Retirement: go.robberger.com/new-retirement/yt-tools

Many retirees have up to three account types: taxable, tax-deferred (e.g., traditional IRA), and tax-free (Roth IRA or HSA). The conventional wisdom tells us to spend the taxable accounts first, then the tax-deferred, and finally the tax-free. It turns out that this approach is rarely optimal.

By making a few adjustments to the conventional approach, particularly in early retirement, we can increase our after-tax spending and the longevity of our portfolio.

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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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All Comments (21)
  • @rob_berger
    As others have informed me, it appears that ORP is, unfortunately, not updated with current tax laws. I've reached out to the creator of the tool and will let you know if I hear anything back.
  • @masoncnc
    Fantastic original content. Definitely not your recycled garbage that your average 20-year-old YouTube financial channel puts out. Great key concepts for the win
  • @ld5714
    Rob, excellent content and discussion today! I appreciate the time and effort you put into your channel and the content you produce. I'm almost 75 and 12+ years into my retirement journey. I wish there was content like today, when I was younger and approaching retirement. I would certainly have approached it differently. I pray your younger viewer listen, learn and do it!! Thanks for all you do Rob. Larry
  • @cceerr11
    Great video, this is the path we are taking. The one thing we do is always convert pre-tax to ROTH while filling the 12% bracket. To us it makes more sense than taking a distribution and investing in an after-tax brokerage account. Since my spouse is still working, we also have the ability to do contributions with left-over money at the end of the year. We even keep our emergency fund in our ROTH. Our ROTH has a dual personality: moderate percentage invested aggressively but still maintaining a portion for emergency fund and other near term planned expenses. It allows us to spend above our 12% AGI target ($126,600 in 2024) without going into the next tax bracket. We also like to pay our taxes the third week in December by doing a pre-tax IRA distribution withholding 99% for taxes. It does take some additional planning to hit our AGI target on December 31st.
  • @erickarnell
    I almost skipped over this video since I (wrongly) assumed that it would be more of the same standard recommendations. Thanks for proving me wrong, and introducing some really interesting alternatives.
  • @robn.5932
    Rob, does New Retirement allow you to figure PTC/ACA Obamacare credits in early retirement years to advise where to spend from? For example I am want to use some Roth early to keep under the 400% FPL.
  • @johnyjsl9219
    ROB.. what if you need ACA subsidies..?? Perhaps you can do similar video taking subsidies into consideration.
  • @arthurcooper3484
    I used to use I-ORP but it is no longer supported. The tax treatment has not been updated since 2020.
  • @mikeg2538
    Question. If you are 50 with $4 million invested having 50% in etfs based on broad indexes (Dow, Spy, Nasdaq) and 50% money market. Is this $ enough to retire? I rent a 2 bedroom apartment, no debt, no kids. I also ask because I have slight back pain sitting at PC 8 hours a day. I wonder how long I can endure it. I anticipate 6% returns but the past 30 years seem like a rosey picture. Thanks.
  • @arunindc6145
    TWO CAVEATS: (1) From what I understand, ORP has not been updated or maintained since 2020, so it does not incorporate current tax laws/rates. According to a thread about this on the Bogleheads forum, the developer of ORP is now in assisted living. (2) New Retirement doesn't treat manually entered transfers correctly when it comes to RMDs. Specifically, manual transfers from an IRA account to a taxable account made during RMD years does not count as an RMD. New Retirement will act as if no money was moved and take the full RMD amount out of the IRA account. Have flagged this issue to the folks at NR. They acknowledge the flaw, but seem unable or unwilling to do anything about it, unfortunately.
  • @paulkempkes8292
    Greetings Rob; Are there any tools that incorporate The Affordable Care Act subsidies/tax breaks for those of us who are retired but aren't 65 yet? Cheers!
  • @joepollino9416
    Nice overview. Another reason to draw down on taxable IRA s first, is the death of a spouse, leading to a jump in taxes with a tax filing of single (both on standard deduction and tax bracket).