Retirement withdrawal order: taxable, traditional or Roth first?

In depth8 min read · updated 2 November 2026 · 9 sources

Most retirees hold money in three kinds of accounts: a taxable brokerage account, traditional 401(k)s and IRAs, and Roth accounts. The retirement withdrawal order decides in which years each dollar is taxed and at what rate. The usual rule of thumb says taxable first, traditional second, Roth last. It is a reasonable start, but followed strictly it wastes the low tax brackets of the early retirement years and piles income into the years when Social Security and required distributions arrive. This article shows how to plan the order with the rules for 2026.

Three kinds of accounts, three tax treatments

• Taxable account: only the gain is taxed when you sell, at long-term rates of 0%, 15% or 20% after one year; the original investment comes back tax-free. Details in capital gains tax.
• Traditional 401(k) and IRA: every dollar withdrawn is ordinary income, because contributions were deducted and growth was never taxed. From age 73, required minimum distributions force withdrawals (IRS, required minimum distributions 2026).
• Roth 401(k) and Roth IRA: qualified withdrawals are tax-free, and Roth IRAs have no required distributions during the owner's lifetime (IRS, required minimum distributions 2026). The trade-off is explained in Roth vs. traditional.

Because income tax is progressive, the same withdrawal costs different amounts depending on what else is taxed in that year. The goal of a withdrawal plan is not to pay the least tax this year, but the least over the whole retirement, and sometimes for the heirs as well.

The conventional order and its weak spot

The rule of thumb is to spend the taxable account first, then the traditional accounts and the Roth accounts last. The logic is sound as far as it goes: the tax-advantaged accounts keep growing without tax for longer. Cook et al. (2015) show, however, that following it strictly is not the most tax-efficient choice; strategies that also use the low tax brackets in the early years can make the same portfolio last more than three years longer than the conventional order.

The weak spot is the shape of taxable income over time. A couple that retires at 62 and lives on the taxable account often reports almost no taxable income for several years. Later, Social Security starts, required distributions begin at 73 and both arrive on top of each other. The low brackets of the early years go unused, and the same money is later taxed at higher rates, in larger amounts than needed and with side effects on the taxation of benefits and on Medicare premiums.

Filling the low tax brackets

The remedy is to take some income from traditional accounts every year, up to the top of a chosen bracket, either as a withdrawal to spend or as a Roth conversion. For married couples filing jointly in 2026, the standard deduction is $32,200, and the 12% bracket ends at $100,800 of taxable income (IRS inflation adjustments 2025).

Whether to fill the 12% or the 22% bracket depends on the size of the traditional accounts. Someone with a large IRA who expects required distributions alone to reach the 22% bracket later gains little by stopping at 12% now. A rough plan is to compare the marginal rate today with the marginal rate expected once Social Security and required distributions have started, and to convert as long as today's rate is lower.

Harvesting capital gains at 0%

The same low-income years also allow a second move. Long-term capital gains are taxed at 0% as long as taxable income including the gains stays below $98,900 for joint filers and $49,450 for single filers in 2026 (Rev. Proc. 2025-32 2025). Gains stack on top of ordinary income, so the room shrinks as IRA withdrawals grow.

Social Security, required distributions and Medicare

Three later events change the picture. Social Security benefits become partly taxable once provisional income passes $32,000 for joint filers, and up to 85% of them above $44,000; in that range, each extra dollar from an IRA can raise taxable income by up to $1.85 (CRS, taxation of Social Security 2025). Required distributions from age 73 add income whether it is needed or not (IRS, required minimum distributions 2026). And Medicare premiums depend on income from two years earlier: in 2026, the standard Part B premium is $202.90 a month, and surcharges, called IRMAA, start above modified adjusted gross income of $109,000 for single filers and $218,000 for joint filers in 2024 (SSA POMS HI 01101.031 2025).

For withdrawals and conversions, this means: the years before Social Security and before 73 are the cheapest window, while large conversions from age 63 on should be sized with the Medicare thresholds in mind, because they raise premiums two years later. Delaying Social Security, discussed in when to claim Social Security, lengthens that window.

Roth conversions and tax diversification

A Roth conversion moves money from a traditional IRA into a Roth IRA. The converted amount is taxed as ordinary income in that year; afterwards, growth and qualified withdrawals are tax-free and there are no required distributions during the owner's lifetime (IRS, required minimum distributions 2026). Converting in low-income years turns money that would later be taxed at high rates into money that is never taxed again.

Holding some money in each kind of account also helps because future tax rates are unknown. Brown et al. (2017) find that this uncertainty makes it worthwhile for most households to diversify between traditional and Roth savings. In retirement, having all three kinds of accounts gives the most freedom to steer taxable income year by year.

A plan in four steps

1. Estimate the later income: Social Security at the planned claiming age, pensions and required distributions from the expected IRA balance at 73.
2. Choose a target bracket: the bracket you expect to be in later; fill it every year before 73 with withdrawals or Roth conversions.
3. Spend from the taxable account for the rest, and use leftover room under the 0% rate for long-term gains.
4. Keep Roth money for last or for heirs, and check the Medicare thresholds before any large conversion.

For heirs, the order matters too. Investments in a taxable account receive a step-up in basis at death (26 U.S.C. § 1014 1954), so highly appreciated holdings are good candidates to keep, while withdrawals from an inherited traditional IRA remain taxable income for the heirs. More in inherited IRA and step-up in basis.

Common mistakes

• Paying no tax at all in the early years: unused 10% and 12% brackets are lost for good.
• Converting too much in one year: a large conversion can jump two brackets and raise Medicare premiums two years later.
• Forgetting required distributions: a large traditional IRA left untouched until 73 forces high withdrawals for the rest of life.
• Selling at a gain in a high-income year: the same sale in a low-income year can be taxed at 0%.
• Planning taxes without the spending plan: the order of withdrawals only works together with a sustainable withdrawal rate.

This article explains general federal rules for 2026 and is not tax advice. State taxes, health insurance subsidies before 65 and individual circumstances can change the best order; a tax professional can model your case.

This article explains a method; it is not investment or tax advice. Worked examples are simplified and rounded. All terms in the glossary.