Withdrawal order
A retired household with money in a brokerage account, an IRA and a Roth has three kinds of dollars that cost different amounts to spend. The order in which they are spent, and how that order changes once Social Security and required distributions arrive, is the retirement-income decision that moves the most money over a thirty-year retirement.
Published September 11, 2026 by Flames Financial Planning. 11 min read.
Short answer: For most households with $2 million to $5 million saved, mostly in tax-deferred accounts, the best order is not "taxable, then IRA, then Roth." It is to level taxable income across the whole retirement: draw from the IRA (or convert to Roth) in the low-income years before Social Security and required distributions, fill a target bracket every year rather than leaving it empty in some years and overflowing it in others, spend the brokerage account's low-basis positions carefully or leave them for the step-up, and keep the Roth for the years and the spending that would otherwise be taxed hardest.
Three kinds of dollars
The same $100,000 of spending is taxed three different ways depending on where it comes from.
| Account | What is taxed when you spend it | 2026 rate that applies | What it does to the rest of the return |
|---|---|---|---|
| Brokerage (taxable) | Only the gain, not the principal. Dividends and interest are taxed every year whether spent or not. | Long-term gains at 0% up to $98,900 of joint taxable income, 15% up to $613,700, 20% above; plus 3.8% above $250,000 of MAGI. | Gains count toward the Medicare thresholds and the Social Security formula, but only the gain does. |
| Traditional IRA or 401(k) | Every dollar, as ordinary income. | The ordinary brackets: 22% to $211,400, 24% to $403,550 of joint taxable income, then 32%. | Raises MAGI dollar for dollar: Medicare tiers, Social Security taxation, the senior deduction and the investment-tax threshold all move. |
| Roth IRA | Nothing, once qualified. | 0%. | Nothing. Roth distributions are not in adjusted gross income, so they move no threshold. |
Sources: IRS, Rev. Proc. 2025-32 (full text); IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32); IRS, Topic no. 559, Net investment income tax.
Two features of that table drive everything else. Ordinary income and long-term gains share the same taxable-income measure but have different schedules, so a dollar of IRA withdrawal can push a dollar of gain from the 0% to the 15% rate, or from 15% to 20%, without being taxed at that rate itself. And the Roth is the only account whose spending is invisible to every threshold, which makes it far more valuable in some years than in others.
The conventional order
The order most households absorb is: spend the brokerage account first, then the IRA, then the Roth. The logic is deferral: every year the IRA is left alone is a year of tax-deferred growth. For a household whose wealth is mostly tax-deferred, the logic breaks in a specific way.
Picture a couple retiring at 65 with $3,000,000 in IRAs and $800,000 in a brokerage account, delaying Social Security to 70. Spending the brokerage account first, their taxable income in the first five years is tiny: dividends, interest and a little gain, most of it inside the $35,500 standard deduction and the 0% capital-gain rate. Then Social Security starts, and at 73 required distributions of well over $100,000 a year arrive on top of it. Their income goes from almost nothing to the 24% bracket and a Medicare tier in the space of a few years, and stays there for life.
Those first five years were the cheapest years of their retirement to take IRA income, and they took none. The 12% bracket, which runs to $100,800 of joint taxable income in 2026, was empty. The 22% bracket, to $211,400, was empty. Every dollar that could have come out at 12% or 22% instead comes out later at 24% or 32%, with a Medicare surcharge attached, or is inherited by children who pay their own rates on it within ten years.
The conventional order minimizes tax in each year. Retirement tax planning minimizes tax across all of them, which usually means paying more in the early years on purpose.
The alternative
The alternative is to decide which bracket the household should occupy for the whole retirement, then fill it every year with whichever income is cheapest to create.
The result is a taxable-income line that is roughly flat from the first year of retirement to the last, instead of a line that starts near zero and jumps to the top bracket at 73. Two households with identical portfolios and identical spending can end up with lifetime tax bills that differ by several hundred thousand dollars on nothing but this.
The brokerage account
The brokerage account is the flexible one, and it has two features the other accounts do not: principal comes out untaxed, and appreciated positions can pass to heirs with their gain erased.
The Roth
The Roth is the account that is spent last in the conventional order and spent deliberately in a leveled plan. Its value shows up in the specific years when other income is expensive, because a Roth withdrawal adds nothing to the return in those years.
A year with a large gain, a property sale or a required distribution that has already filled the target bracket. Living expenses drawn from the Roth in that year add nothing to the return, no Medicare tier, no Social Security taxation, no investment-tax exposure.
A widow or widower files single, with roughly half the bracket room and half the Medicare thresholds ($109,000 rather than $218,000), on much the same income. Roth money spent in those years is worth the most it will ever be worth.
An inherited Roth passes under the same ten-year rule as a traditional IRA but adds nothing to the heirs' income. For a household that will not spend everything, the Roth is the account to leave and the traditional IRA is the account to spend or give.
Spending the Roth first, to "enjoy the tax-free money," is the one order that is almost always wrong: it uses the most flexible account in the years when flexibility is worth the least. Spending it never, out of a reluctance to touch it, wastes it in a different way, because the years when it would have saved the most tax pass by.
The moving parts
Required distributions begin at 73 for people born 1951 through 1959 and 75 for those born in 1960 or later, so the low-income window is eight to ten years long for someone retiring at 65. That is enough time to move a great deal of money at a lower rate than it would otherwise ever see. Source: IRS, Internal Revenue Bulletin 2024-33 (T.D. 10001, final required minimum distribution regulations).
Flames FP approach
Flames Financial Planning coordinates investments, taxes, retirement income and estate guidance under a flat quarterly membership, with no fee on assets. Planning includes proactive tax guidance and a planning-focused review of a completed personal return. Premier adds ongoing tax projections, Roth-conversion and capital-gain modeling, retirement-income and withdrawal implementation, and eligible tax-return preparation and filing through an independent tax partner.
$150 per quarter
$600 annualized
$900 per quarter
$3,600 annualized
$1,650 per quarter
$6,600 annualized
Memberships are billed quarterly in advance with no annual commitment. See what each includes on the pricing page, read how the pieces fit together on the retirement tax planning overview, or, if you are weighing a subscription firm, see the side-by-side with Facet.
FAQ
It depends on the mix. A household whose wealth is mostly tax-deferred usually does best drawing from the IRA, or converting to Roth, in the low-income years before Social Security and required distributions, filling a target bracket every year rather than leaving it empty early and overflowing it later. The conventional order (taxable, then tax-deferred, then Roth) suits a household whose wealth is mostly in a brokerage account.
Usually not literally last, and never first. The Roth is worth the most in the years when other income is expensive: a year with a large gain or required distribution, the years a surviving spouse files single, or as the account left to heirs. Spending it deliberately in those years, rather than either first or never, is what it is for.
Long-term capital gains and qualified dividends are taxed at 0% while joint taxable income, including the gains, stays at or below $98,900 ($49,450 for a single filer), at 15% up to $613,700 joint, and 20% above. IRA withdrawals and conversions use up that room, so gains and ordinary income compete for it.
Yes. IRA withdrawals and conversions count in full toward the modified adjusted gross income that sets Medicare surcharges two years later, while Roth distributions and the principal portion of brokerage sales do not. Above $218,000 of joint MAGI the surcharge tiers begin, so the account a given year's spending comes from can decide whether a tier is crossed.
Holding money in all three kinds of account (taxable, tax-deferred and Roth) so that each year's spending can be drawn from whichever is cheapest that year. A household with only a large IRA has no choice about its taxable income in retirement; a household with all three has a great deal.
Property inherited from a decedent generally takes a basis equal to its fair market value at the date of death, so a position with a large unrealized gain that the household will not need is often worth more to heirs unsold. Positions that will be sold anyway are better sold in years when the gain is taxed at 0% or 15%, or given to charity at fair market value.
Keep reading
Filling the target bracket with conversions rather than withdrawals when the money is not needed for spending.
The portfolio-design half of the same decision.
Withdrawal order, conversions and Social Security timing decided together, under a flat fee.
This article is educational and is not individualized tax, legal or investment advice. Thresholds, rates and premiums are revised every year; the figures here are for tax year 2026 as published by the sources above, and you should confirm the current year’s before acting on any of them. Advisory services are offered through Core Planning, LLC, a Registered Investment Advisor.
