How Much to Take from Tax-Free, Taxable, and Tax-Deferred Accounts in Retirement?

by | Feb 4, 2023 | Tax Deferred Retirement Income | 0 comments


Hi Joe and Al, I really enjoy your podcast, insights, and humor and wanted to ask a spitball question! First, to start off, I drive a 2017 Hyundai Elantra, and my favorite drink is Lagunitas IPA. I am 50 and plan to retire in 12 years. When I estimate my accounts at my goal retirement age of 62 (using an annual interest rate of 6% and yearly max contribution to the Roth) I have these numbers: Roth 1.5 million, Traditional 1.5 million, and taxable savings account $ 200k. Here is the question: in what proportion do you usually recommend drawing down from these accounts once you hit retirement? Many traditional professionals I looked up recommend withdrawing first from taxable accounts, then tax-deferred accounts, and finally Roth accounts where withdrawals are tax-free. They write that the goal is to allow tax-deferred assets to grow longer and faster. However, a recent Fidelity post shared an example and data that if you draw from all three accounts (taxable savings, Roth, traditional) at the start of retirement, you will lower the overall tax amount over the life of the portfolio- for a net reduction in total taxes on paid income in retirement. What do you usually recommend doing when retirement hits- do you agree to withdraw from all three accounts? I agree that the Roth is valuable, so I would be hesitant to lower the amount by taking withdrawals from it in my 60s- but if it makes sense in the big picture, I can see the point. Thanks so much, I look forward to your podcast every week during my commute to work.

Jo, Ventura, CA

Jeremy Adams

Life Planner

Jeremy’s clients and their families are as important as his own family to him. He does all he can to ensure his clients have the protections they need to live a life free of worry for the future.