The Most Effective Strategy
The simplest, also the most effective withdrawal strategy is to use money from savings and retirement accounts in the order below, with one important caveat. For certain retirement accounts, if you are 70½ or older, required minimum distributions (RMDs) come first. For inherited qualified accounts like a traditional IRA, RMDs may come before age 70½, but the rules are complex, so be sure to check with a tax professional.
- Taxable accounts (e.g. a Brokerage account)
- Tax-deferred accounts (e.g. traditional IRAs, 401(k)s, 403(b)s, and SEP IRAs)
- Tax-exempt accounts (e.g. Roth IRAs, Roth 401(k)s, and Roth 403(b)s)
We will explain why this is the best strategy in next blog post.