Are You Withdrawing From the Right Bucket in Retirement?

One of the biggest decisions you’ll make in retirement isn’t just how much to withdraw—it’s where to take it from.

At Momentum Wealth, we help clients answer this question every day. Because when it comes to retirement income, your withdrawal strategy can be the difference between keeping more of what you’ve earned—or giving more than necessary to Uncle Sam.

Let’s break it down.

The Three Types of Retirement Buckets

We like to think of retirement income sources in three main categories:

1. Always-Taxed Accounts
This includes income that’s taxed no matter what—like bank interest, dividends in brokerage accounts, rental income, and even Social Security and pensions. Every year, you’ll receive a 1099. Every year, it’s taxed.

2. Later-Taxed Accounts
Think 401(k)s, IRAs, and other pre-tax retirement accounts. You didn’t pay taxes going in, but you will when you take money out—often at ordinary income rates. Once you turn 73, Required Minimum Distributions (RMDs) kick in whether you need the money or not.

3. Tax-Free Accounts
Roth IRAs, Roth 401(k)s, and some permanent life insurance strategies fall in this category. Withdrawals, if structured correctly, can be tax-free for life. These accounts are your most tax-efficient assets—but they also come with specific rules and opportunities.

It’s Not About Choosing One Bucket First

Many people assume they should simply “spend down” one account at a time. In reality, the most efficient plans typically take a blended approach—drawing from multiple sources in a way that reduces taxes over time and keeps your plan sustainable.

A few examples:

• Drawing from a Roth IRA may not increase your taxable income at all
• Taking too much from your 401(k) in a single year could push you into a higher bracket
• Strategic withdrawals can reduce how much of your Social Security is taxable (it can jump from 0% to 85% depending on other income)

That’s why order matters. Timing matters. And a plan matters.

Why You Need a Written Retirement Income Plan

We say this often at Momentum Wealth:
A written plan beats a hopeful guess—every time.

Your plan should clearly show:

• How much income you’ll need each year
• Where that income is coming from
• How to make withdrawals in the most tax-efficient way
• How to adapt when life or markets shift

And if you’re sitting on mostly pre-tax savings? That’s where Roth conversions can come into play.

Roth Conversions: A Long-Term Tax Strategy

By converting part of your pre-tax IRA or 401(k) to a Roth, you pay taxes now—at known rates—and gain tax-free access later.

But this move isn’t for everyone. Your current tax bracket, Social Security timing, Medicare premiums, and legacy goals all play a role. That’s why we often recommend incremental Roth conversions over time—not all at once.

When done thoughtfully, this strategy can:

• Lower your RMDs
• Reduce your future tax liability
• Leave a more efficient legacy for your heirs

It’s Not Just About the Math—It’s About the Strategy

Taxes in retirement aren’t just a line item—they’re a strategy. And the more proactive your approach, the more flexibility, clarity, and confidence you’ll have.

At Momentum Wealth, our retirement income strategies are designed to support all five areas of your financial life: Income, Investments, Taxes, Health Care, and Legacy. Because retirement planning isn’t about guessing—it’s about moving forward with purpose.

Need help building your written retirement income plan with a tax strategy designed just for you?

Let’s talk.

Because the name of the game in retirement is simple:
Keep more. Stress less. Move forward with confidence.

Always moving forward.