Which Retirement Account Should You Withdraw From First?
At Momentum Wealth, we believe you’ve worked too hard not to enjoy every minute of your retirement. That’s why our Retire Forward Process™ is designed to help you make confident, purposeful decisions at every stage of the journey—including how and when to start withdrawing from your retirement accounts.
One of the most common questions we hear from families is:
“Which account should I withdraw from first?”
It’s a great question—and one that deserves a strategic answer.
The “Junk Drawer” of Retirement Accounts
When we first meet with new clients, it’s not uncommon to see what we call a financial “junk drawer.” Statements from IRAs, Roth IRAs, brokerage accounts, and old retirement plans are often scattered across different institutions with no real plan in place. Without a clear withdrawal strategy, you could be leaving money—and peace of mind—on the table.
At Momentum Wealth, we help you bring clarity and order to your retirement assets by aligning each account with its purpose and optimal role in your income strategy. Here’s how we typically approach the withdrawal sequence:
Step 1: Start with Taxable Accounts
These include:
- Non-qualified brokerage accounts
- Individual or joint investment accounts
- Bank savings and checking accounts
Why begin here?
- Liquidity: These funds are easily accessible, especially if you retire before age 59½. Early withdrawals from tax-deferred accounts may carry penalties.
- Preserve Tax-Advantaged Growth: Tapping taxable accounts first allows your IRAs and Roth accounts to keep growing tax-deferred or tax-free.
Step 2: Move to Tax-Deferred Accounts
These include:
- Traditional IRAs
- 401(k)s
- Other qualified retirement accounts
Why now?
- Required Minimum Distributions (RMDs): Once you reach age 73, the IRS requires you to start withdrawing from these accounts. Starting earlier can help manage your tax liability over time.
- Legacy Considerations: Money left in tax-deferred accounts is subject to income tax when passed to heirs. Strategic withdrawals now can reduce the future burden on your loved ones.
Step 3: Tap Tax-Free Accounts Last
These include:
- Roth IRAs
- Roth 401(k)s
- Cash value life insurance with tax-free access
Why wait?
- Tax Flexibility: Tax-free withdrawals give you options during high-income years or when managing your overall tax bracket.
- Long-Term Growth: These accounts can grow tax-free for as long as possible, potentially increasing your overall legacy and financial flexibility.
Customizing the Strategy to Fit You
While this order provides a helpful framework, your plan might look a little different—and that’s okay. A customized withdrawal plan considers your tax situation, income needs, healthcare costs, and personal goals. Sometimes, blending withdrawals from different account types is the most efficient route.
Planning Brings Confidence
Ultimately, having a strategy is what gives you the confidence to move forward. At Momentum Wealth, our team of experts helps you align your withdrawal strategy with our five key retirement planning areas: income, investments, taxes, health care, and legacy. It’s all part of helping you live with the confidence you deserve and the freedom you’ve earned.
If you’re ready to make smart, intentional decisions about your retirement income, we’re here to guide you—every step of the way.
Let’s plan your next move, together.
Always moving forward.
