Why the Order You Withdraw Retirement Money In Matters More Than the Amount

The withdrawal order most retirees get backwards between 59 and 67, and the fix.

A couple sat across from me a few months ago. Both had just turned 62. Both had done everything the financial industry told them to do for thirty years.

Maxed the 401(k). Never touched it early. Left it alone to compound.

Their combined pre-tax balance was $1.6 million. Their taxable brokerage account held about $180,000.

The husband said something I hear almost every week: “We’re trying not to touch the IRA. We want it to keep growing.”

I understood the instinct. I told him it was the single most expensive piece of advice he had ever followed without checking the math.

The Advice That Sounds Right and Costs a Fortune

“Leave the retirement accounts alone as long as you can” is not bad advice.

It is incomplete advice, and incomplete advice is how good savers end up with a tax problem instead of a retirement.

Here is the part almost nobody explains: the years between 59 and 67 are usually the cheapest income years a retiree will ever see again.

Paychecks have stopped or slowed. Social Security has not started. Required Minimum Distributions do not begin until 73 or 75.

For a short stretch, you control your taxable income more completely than at almost any other point in your life.

Most people spend those years withdrawing nothing from their IRA and spending down their taxable brokerage account instead, because it feels like the tax-smart move.

It is the missed opportunity, literally, of a lifetime.

Watch me explain how the sequence should work and summarize this article, on a whiteboard.

What “Leaving It Alone” Actually Costs

Every year that money sits in a traditional IRA, it compounds. So does the IRS’s share of it.

You own the balance. The IRS owns a percentage of it, and that percentage does not shrink by waiting.

The couple in my office had thirteen years until RMDs would start. If their $1.6 million grew at a conservative 6% and they touched none of it, they would arrive at 75 with a balance north of $3 million.

Their first Required Minimum Distribution, taxed entirely as ordinary income, would land somewhere around $113,000. Add Social Security. Add whatever was left in the brokerage account.

They would spend their first year of mandatory withdrawals in a higher bracket than most of their working career.

They had never run that projection. Almost nobody does, because the RMD feels like a problem for a future version of themselves to solve.

The Opportunity Almost Everyone Misses

Conventional order: Social Security first, taxable brokerage second, IRA and 401(k) last, because “it’s already tax-deferred, why rush it.”

Pulling from a taxable account, which is capital gains instead of ordinary income, between 59-67 is a great strategy. It keeps your taxable income low during this period of time, possible even zero.

What most pre-retirees or retirees miss however, is that it’s a phenomenal opportunity so show some income and pay some tax at a lower rate while they are in control.

That is not the natural instinct. It sounds backwards the first time a client hears it. But the goal in these years is not to avoid touching the IRA.

The goal is to convert it deliberately, on your own terms, at today’s known tax rates, before the IRS sets the withdrawal amount for you at 73 or 75.

Filling the Bracket, Not Just Meeting the Need

The mechanic is simple. Every year, calculate the top of your current tax bracket. Withdraw or convert from the IRA up to that ceiling, even if you do not need the cash to live on.

If the money is not needed for spending, it moves into a Roth, where it will never be taxed again and never generates a mandatory withdrawal.

For a married couple in the 22% bracket in 2026, that ceiling sits at $211,400 of taxable income. Every dollar withdrawn or converted below that line costs less than 22 cents because you’re effective tax rate will not be 22%.

Compare that to waiting until 75, when the same dollar could be taxed at 24% or higher once RMDs, Social Security, and Medicare surcharges stack on top of each other.

The couple I mentioned started a six-year plan. Converting roughly $85,000 a year, filling their bracket precisely, paying the tax now while the rate was known and controllable.

By the time RMDs arrive, their projected pre-tax balance will be closer to $1.1 million instead of $3 million. Their mandatory withdrawal drops from six figures to something closer to $41,000.

Same couple. Same savings. Completely different tax bill for the rest of their life.

Why 65 Complicates the Math

Medicare enrollment lands in the middle of this window, and it changes the calculation. Medicare uses your tax return from two years prior to set your Part B and Part D premiums.

A large conversion at 63 can trigger a higher Medicare premium at 65, even though the conversion itself happened two years earlier.

This is the part that trips up people who try to do this math on their own. The right conversion amount is not just about the current year’s bracket. It is about what that number does to a Medicare premium calculation that will not show up on a bill until two years later.

Filling the bracket without checking the IRMAA thresholds first can quietly erase a chunk of the tax savings the conversion was supposed to create.

The One Thing to Do This Week

Pull your most recent tax return. Find your taxable income line. Find the ceiling of your current tax bracket. Subtract one from the other.

That gap is the room you have this year to withdraw or convert from your IRA at today’s known rate, before RMDs, Social Security, and Medicare start making the decision for you.

That single number is where every conversation like this one actually starts.

Roth Conversion Math in Detail

If you’re serious about considering Roth conversions, I would highly recommend that you go back and read one of my previous articles discussing the math behind Roth conversions from our planning work at Revolutionary Wealth.

When it makes sense, who gets the most out of the strategy, and also when you should avoid them.

Here’s the best part, it’s based on real life experience from Revolutionary Wealth actually helping people convert money from their IRA to Roth IRA.

Zero fluff, zero theory, all real numbers from real planning. Check it out.

Are you a visual learner? Check out my video Roth Conversions: The 4 Factors Most Advisor Never Bring Up

AI & Analog

Starting Sunday, July 12th, I’m going to start sharing a new personal journey. Two extremes, my life.

I’ve been a huge proponent of using and adopting AI for a while now. Our firm and I have already seen the exponential benefits of applying it to our business and lives. My belief is that I’m just getting started and I’m only going to dive deeper.

On the other extreme, I often have this image of being shown a replay of my life when I’m older (kind of like the movie Click with Adam Sandler) and I’m being shown that I’m just sitting on my phone when my kids are growing and changing in front of me.

That visualization I have haunts me, I actually think about it pretty often. I’m also willing to admit that I tend to pull my phone out from boredom more than I’d like to admit.

In response to that, I’m going completely dark on screens in front of my kids when I get home from work and the weekends.

I’m going to start carrying a flip phone!! I’ll get home and put the phone in a cubby until the kids are asleep or the weekend is over. The hope is that I can expand this time more and more.

This will break me or it will change my life. We will find out together and you’ll get to read my documented journey, every Sunday.

I appreciate your attention, cheers!

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This blog contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this blog will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Revolutionary Wealth LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.

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Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.

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