Retirement Distribution Planning

Why Distribution Order Matters

Most retirees have savings in multiple account types: taxable brokerage accounts, tax-deferred accounts (traditional 401(k)s and IRAs), and potentially tax-free accounts (Roth IRAs). Each account type is taxed differently when you withdraw, and the order in which you draw from them affects your total tax bill over the course of retirement.

The conventional approach — draw from taxable first, then tax-deferred, then Roth — isn't always optimal. If you have a large traditional IRA, letting it grow untouched until RMDs begin at 73 can create a tax bomb: forced withdrawals that push you into higher brackets, trigger Social Security taxation, and increase Medicare premiums.

Strategic distribution planning considers the full picture — your current bracket, future RMDs, Social Security taxation thresholds, and the long-term growth potential of each account type. Sometimes paying a little more tax now (through early traditional withdrawals or Roth conversions) saves significantly more later.

Plan Around Required Minimum Distributions

RMDs are the biggest wild card in distribution planning. Starting at 73, the IRS requires you to withdraw a minimum amount from traditional retirement accounts each year. The percentage increases as you age, and the withdrawals are fully taxable.

For someone with $800,000 in a traditional IRA at 73, the first RMD is roughly $30,000. By 80, it grows to roughly $38,000. By 85, roughly $47,000. These mandatory withdrawals stack on top of Social Security and any other income, potentially pushing you into the 22% or 24% bracket even if your voluntary spending is modest.

The window between retirement and age 73 is your opportunity to manage this. Roth conversions, strategic early withdrawals, or a combination can reduce your traditional balance before RMDs begin, giving you more control over your taxable income for the rest of your life. Evernest's year-by-year projection shows you exactly how different strategies affect your projected RMD amounts and overall tax picture.

Model Your Distribution Strategy

Evernest shows you how your portfolio balance, income, and withdrawals interact over 30+ years. By modeling different withdrawal sequences, you can compare their long-term effects on your total portfolio and identify the strategy that preserves the most wealth.

Test the conventional approach against a more strategic one. Compare drawing $40,000 per year from your traditional IRA starting at 62 (paying tax at 12-22%) versus waiting until 73 when RMDs force $30,000+ in taxable withdrawals on top of your Social Security (potentially at 24%+). The projection shows you the cumulative difference.

The right strategy maximizes your after-tax income while preserving the most portfolio growth. Evernest gives you the data to find that balance — no guesswork required.

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