How to Withdraw From Your Retirement Accounts in the Most Tax-Efficient Manner
Robert Powell, CFP®
When it comes to generating income in retirement from your various accounts, conventional wisdom would have you withdraw money from your taxable accounts first, then your tax- deferred accounts and, finally, your Roth account.
And, there's some logic to this approach, says Roger Young, a senior financial planner and vice president with T. Rowe Price Associates. "If you draw from taxable accounts first, your tax- advantaged accounts have more time to grow tax-deferred," he noted in a recent paper, Retirement Pulse: Tax-Efficient Withdrawal Strategies. "Leaving Roth assets until last provides potential tax-free income for your heirs. Plus, it is relatively easy to implement."