401(k), IRA, or Brokerage? The Right Order to Withdraw Retirement Money in 2026
Retirees are facing higher expenses than planned. Before you tap your nest egg, use this three-step withdrawal sequence to protect your money.
With gas prices, healthcare costs, and everyday expenses all climbing, it's understandable if you need to tap your retirement savings sooner than planned.
You wouldn't be alone. After all, 49% of retirees in a recent Schroders survey said expenses in retirement are higher than expected.
But the order in which you withdraw your savings in retirement can make all the difference. Pull from the wrong account first, and you can give up growth, spike your Medicare premiums, or trigger an unnecessary tax bill. Take from the right one, and it could mean less taxes, more money, and a longer-lasting nest egg.
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From 401(k)s to Roth IRAs, here's the order to draw down cash when you need more money in retirement.
1. Start with your taxable brokerage account
If you need more money in retirement than you planned, start with your taxable brokerage account.
Why? If you withdraw from a traditional 401(k) or IRA, that money is taxed as ordinary income, which could push you into a higher tax bracket, increase your Medicare premiums, and/or make your Social Security benefits taxable. Plus, that is less money that is growing and compounding tax-advantaged.
But if you withdraw from your brokerage account, the money will likely be taxed at the long-term capital gains rates, which are typically lower than ordinary income tax rates.
How? First, look for any cash, dividends, or interest that has accumulated and can be skimmed off the top. If you do have to sell assets, try to find stocks trading at a loss. You can use them to offset gains elsewhere in a strategy known as tax-loss harvesting. If you are selling stocks with gains, pick ones you have owned for more than a year so they qualify for the long-term capital gains tax rate.
Who? This works for retirees with investment portfolios who want to keep their taxable income low for the year.
2. Next, tap your traditional 401(k) and IRAs
Once you've exhausted your taxable brokerage account, the next place to withdraw money from in retirement is your traditional 401(k) and IRAs.
Why? Withdrawing from pre-tax accounts like traditional 401(k)s and IRAs instead of a Roth IRA leaves your tax-free savings untouched, allowing them to grow for late retirement or your heirs.
How? To avoid jumping into a higher tax bracket, withdraw just enough to fill the top of your current tier without spilling over. Tip: Watch your modified adjusted gross income so your withdrawals don’t trigger higher Medicare Part B and Part D surcharges two years down the road.
Who? This makes sense for retirees between 59-1/2 and 73 who need income before Social Security and Required Minimum Distributions kick in. Spreading out withdrawals during these lower-income years can shrink your future account balances, defusing a potential RMD tax bomb later in life.
3. Last, pull from your Roth 401k and Roth IRA
Your Roth 401(k) and Roth IRA are the final places you would want to withdraw money from.
Why? Roth money is the most tax-friendly of any potential savings and should be left to grow and compound for as long as possible. When you withdraw money, every dollar is tax-free. Unlike traditional accounts, Roth IRAs and Roth 401(k)s have no RMDs during your lifetime. Leaving this bucket to withdraw from last maximizes the years of compound, tax-free growth. It also serves as an inheritance asset, allowing your heirs to inherit the funds completely tax-free.
How? Because these accounts sit untouched the longest, hold your highest-growth investments here to maximize tax-free returns. When withdrawing cash, use your Roth strategically; tap tax-free Roth dollars to cover sudden, larger expenses without bumping your taxable income into a higher bracket or triggering higher Medicare surcharges.
Who? This makes sense for retirees who have already drawn down their taxable accounts, satisfied their traditional pre-tax distribution limits for the year, and need extra cash without taking an income tax hit.
Withdrawing in the right order protects your savings
Taking extra money from your retirement accounts isn't ideal, but it doesn't have to derail your plan. By withdrawing from your accounts in the right order — starting with taxable funds, moving to traditional pre-tax balances, and saving your Roth for last — you can keep your taxes at bay and your money growing.
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