How Retirees Can Sequence Account Withdrawals to Cut Tax Bills
A Pennsylvania-based financial advisor outlines strategies for choosing which retirement accounts to tap first to reduce taxes and extend savings.
Deciding which retirement accounts to draw from first can have a significant impact on how long savings last and how much retirees owe in taxes each year, according to financial advisor Ash Toumayants of State College, Pa., whose insights were published in HelloNation.
The withdrawal sequence — the order in which retirees pull money from taxable brokerage accounts, tax-deferred accounts such as traditional IRAs and 401(k)s, and tax-free accounts such as Roth IRAs — determines the annual tax burden throughout retirement. Poor sequencing can push retirees into higher brackets or trigger surcharges on Medicare premiums.
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Toumayants emphasizes that retirement income planning is not a one-size-fits-all exercise. Individual factors including current tax bracket, projected future income, Social Security timing, and estate planning goals all influence which account should be tapped at any given stage of retirement.
Strategic withdrawals can also create opportunities to convert portions of tax-deferred savings into Roth accounts during lower-income years, potentially shielding future growth from taxation. Such moves require careful coordination with a tax professional to avoid unintended consequences.
For retirees navigating these decisions, the core principle is managing taxable income year by year rather than simply spending down the most accessible account first. Continue reading at All Financial Services & Investing.
