Retirement Income Strategy – What’s the Best Order to Withdraw Assets? Method #2

Last week, we talked about spending down retirement money starting with already-taxed assets, then tax-deferred accounts, and ending with Roth IRAs.

This week, we look at spend down Method #2:  Tax-deferred (Traditional IRAs, 401(k)s)  first, taxable (non-retirement) accounts second, Roth IRAs last.


  • Spreads the taxes owed on tax-deferred accounts out over a longer period of time.  This could result in lower year-to-year tax bills and possibly keep you in a lower tax bracket, depending on your total income.
  • If there is any taxable money left over for heirs, they will get a step up in cost basis on the assets they inherit.  Also, they are not forced to take that money out on some IRS mandated schedule.
  • Roth IRA money must be taken out over heirs’ lifetimes, but the withdrawals are income tax free.  Of course, there is talk of changing that preferred tax treatment for non-spouse heirs, so stay tuned for tax law changes.  It may turn out to be more beneficial for retirees to spend Roth money than leave it for heirs.


  • Larger tax bills in the early years of retirement when withdrawals tend to be higher to pay for fun stuff.
  • You are paying taxes on your kids’ inheritance as well as supporting your own retirement needs.

Next week, withdrawal order #3!  Fun stuff!

If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or for more information.


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