Withdrawal Sequencing: Which Accounts to Tap First in Retirement

Two retirees can retire with the exact same account balances — the same amount in a brokerage account, the same amount in a traditional IRA, the same amount in a Roth — and end up with meaningfully different lifetime tax bills. The difference usually isn't what they invested in. It's the order they drew the money out.

That's what withdrawal sequencing means: deciding which account to tap first, which to tap second, and which to leave alone longer, so the income holds up and the tax bill doesn't run higher than it has to. It sounds like a minor mechanical detail. In practice, it's one of the few retirement decisions you have real, ongoing control over — most others (when Social Security pays, what the market does) you don't.

The Three Buckets, and Why They're Taxed Differently

Most retirees are drawing from some mix of three account types, and each one is taxed on its own schedule:

• Taxable accounts(brokerage, savings) — you've already paid tax on the money you put in; withdrawals are only taxed on any growth, usually at capital gains rates.
• Tax-deferred accounts(traditional IRA, traditional 401(k)) — contributions went in pre-tax, so every dollar withdrawn is taxed as ordinary income, and the IRS eventually requires withdrawals whether you need the income or not.
• Tax-free accounts(Roth IRA, Roth 401(k)) — contributions went in after-tax, so qualified withdrawals come out with no tax at all.

Because each bucket is taxed differently,whenyou draw from each one is a separate decision fromhow muchyou need in total.

The Conventional Order — and Its Limits

The commonly cited default sequence is: taxable accounts first, tax-deferred accounts second, Roth accounts last. The logic is straightforward — spend the money that's already been taxed, let tax-deferred and tax-free accounts keep compounding as long as possible, and save the Roth for last since it has no required withdrawals during your lifetime and passes to heirs tax-free.

That order is a reasonable starting point, and for some retirees it's close to right. But treated as a rule rather than a starting point, it can backfire in two common ways. Draining taxable accounts completely before touching anything else can leave you with a large traditional IRA balance by the time required minimum distributions (RMDs) begin — currently age 73 (Source: IRS, “Retirement Topics — Required Minimum Distributions (RMDs),” updated April 8, 2026) — forcing large, mandatory taxable withdrawals in years you may not need the income. And ignoring your tax bracket in the years before RMDs start can mean missing a real opportunity: years when your taxable income is unusually low are often the cheapest time you'll ever have to draw down a tax-deferred account or convert some of it to a Roth.

Filling the Bracket, Not Just Following the Order

A more precise approach looks at your tax bracket each year, not just your account types. For 2026, the federal brackets run from 10% up through 37%, with the thresholds adjusted annually for inflation (Source: IRS, “IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill,” IR-2025-103, October 9, 2025). The idea behind “bracket filling” is to withdraw enough from tax-deferred accounts each year to use up the room in your current bracket — but not so much that you spill into the next one — supplementing the rest of your spending from taxable or Roth sources.

Done consistently over a multi-year retirement, this can smooth out a household's total tax bill instead of concentrating it in a handful of high-RMD years later on. It also means the “right” sequence isn't a fixed order at all — it can mean drawing from more than one bucket in the same year, in different proportions from one year to the next.

There's No Universal Sequence — Only a Sequence for Your Numbers

The account-type mix, the size of each account, other income sources (Social Security, a pension), your state of residence, and what your RMDs will eventually look like all change the answer. A sequence that minimizes taxes for one household can be the wrong call for another with a different mix of the same three account types. This is why withdrawal sequencing has to be built around your specific numbers, revisited periodically, and coordinated with the rest of your income plan — not applied as a one-size-fits-all rule.

Where to Go From Here

If you haven't looked at which accounts you'll draw from first — or whether your current plan is quietly pushing you into a higher bracket later — that's worth a closer look before RMDs start making some of these decisions for you.

Derryrush Wealth Management is a fee-only fiduciary registered investment adviser based in West Sayville, NY, serving pre-retirees, business owners, and individuals navigating divorce across Long Island.If you'd like to talk through what a withdrawal sequence would look like for your specific situation,schedule a complimentary introductory conversation.

Derryrush Wealth Management LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. James Connolly, Certified Divorce Financial Analyst®, is the founder of Derryrush Wealth Management LLC.

Information presented is for general educational purposes only and does not constitute personalized investment, tax, or legal advice. It does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance. Withdrawal rates, tax treatment, and account sequencing depend on individual circumstances and are not guaranteed to produce any particular result. Consult a qualified financial adviser, tax professional, and/or attorney before implementing any strategy discussed herein.

This article reflects our understanding of applicable tax law, program rules, and other facts as of its publication date. These are subject to change, sometimes with little notice, and we do not undertake to update this article afterward. Confirm any specific figure, age, rate, or deadline referenced here is still current before relying on it.