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Created: February 26, 2024
Modified: February 22, 2024

Which Retirement Accounts Should I Withdraw From First?

Today’s question is all about income planning and specifically, which accounts should I be withdrawing from first when I’m retired?

Answering that question without knowing more about your specific situation is challenging. However, when you are devising an income generation plan, it is crucial to keep taxes in mind. How much tax will I be on the hook for as a result of where I’m taking it from?

Bucket Strategy

We believe in buckets. Different buckets do different things. Different accounts live in different tax worlds. You want to put a plan in place that makes sure you get the income you need without blowing yourself up from a tax standpoint.

What do I mean by that? Well, if all your money is in an IRA, 401(k), pension, or 403(b), every dollar you take out is going to hit you as income. All of a sudden, you could find yourself in a world in which you’re no longer working and no longer saving, but because of the distributions you’re taking off of your retirement accounts, you’re earning more money from a tax standpoint than you’ve ever earned while working. That could be a problem.

Tax Brackets in Retirement

It’s not uncommon to see folks come in and just because of how good of a job they’ve done saving, they find themselves in the highest tax bracket they’ve ever been in. Meanwhile, they’ve been retired for five or six years.

So, we’re big believers in smoothing out where those distributions are coming from.

Put a Tax Plan in Place

In other words, take some money out of the IRAs, keeping in mind that it is going to hit you as income. But also take some money out of the brokerage account, the bank, and maybe the CD, where the dollars that hit you don’t impact Medicare premiums or take-home on your Social Security.

Remember that whenever it comes down to where you’re going to get your money when you need it, you also need a tax plan.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

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