By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists agree that the 'Traditional first, then Roth last' withdrawal sequencing advice is oversimplified and may not be optimal for all retirees. They emphasize the importance of personalized modeling considering individual tax brackets, state tax treatment, RMDs, IRMAA surcharges, Roth conversion windows, and sequence of returns risk.
Risk: Permanently higher lifetime taxes due to the interaction between the TCJA sunset and RMD timing, as well as the 'death-band' risk of triggering IRMAA and tax spikes upon the death of a spouse.
Opportunity: Significantly lowering lifetime tax liability through Roth conversions during low-income years and managing taxes through dynamic modeling.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
If you are like most investors, you have a bevy of investment accounts.
A taxable account, a traditional tax-deferred account, and a Roth tax-advantaged account are all likely to be in the mix.
There's a big risk if you don't withdraw money from these accounts in the right order.
Most savers end up with multiple retirement accounts. There's really no way around it, but it makes life a lot more complicated when you retire. Make the wrong withdrawal decisions, and you could be left with higher taxes and even reduced benefits. Here's what the average retiree gets wrong about withdrawal order.
There are basically three types of accounts that investors end up with. The first is a taxable account, which is just a regular old brokerage or mutual fund account. You pay taxes as you go with regard to capital gains, dividends, and interest you may earn.
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The next accounts you likely have are both tax-advantaged and fall into two basic buckets. You may own a traditional IRA and/or a traditional 401(k). These are tax-deferred accounts, in which the money is deposited before taxes are paid. The upfront benefit is that you reduce your taxable income in the year you make a contribution. While the money is in the account, it grows tax-free. However, when you withdraw money from one of these accounts in retirement, all of the withdrawal is taxed as income.
The final bucket of accounts is in the Roth category. You may have a Roth IRA, a Roth 401(k), or both. You pay taxes on the money before it is invested in one of these accounts. The money grows tax-free while it is in the account. However, because you paid taxes on the way in, your withdrawals are tax-free after 59 1/2 (assuming you have owned the account for at least five years).
If you retire early, you want to use money from a taxable account. There are penalties associated with pulling money from IRAs, 401(k)'s, Roth IRAs, and Roth 401(k)s if you take money out before 59 1/2. Unless you absolutely need the money, it is best to leave retirement accounts alone until at least that age.
Once you hit 59 1/2, however, the situation changes dramatically. Many people looking to avoid taxes will tap their Roth accounts first. Logically, that makes sense, but it can leave you vulnerable to a bigger hit later. This is because there are mandatory withdrawal rules for Traditional IRAs and 401(k)s. At some point, you will be forced to take the money in these accounts. If the value of those accounts continues to appreciate because you don't withdraw from them, your withdrawals may be larger than you expect.
Larger mandatory withdrawals mean more taxable income and higher taxes. Worse, depending on the size of the mandatory withdrawals, you could end up with higher costs for medical care if your Medicare premiums go up. By delaying withdrawals from a Traditional IRA or Traditional 401(k), you could end up with higher taxes and higher costs. It is better to start withdrawing funds from these accounts as soon as possible to avoid the double hit.
That leaves Roth IRAs and Roth 401(k)s to be tapped last. Since they don't have withdrawal mandates, there is no problem with that timing. And since there are no taxes that need to be paid when you withdraw the cash, you don't have to worry about the impact of the money on your taxes or your medical costs. Yes, you'll pay more in taxes early on by waiting to tap your Roth accounts, but in the long run, it will likely save you taxes and reduce your expenses if you do.
Most of the time, money is pretty fungible, but not when it comes to the decision to withdraw funds from your accounts in retirement. If you make the wrong call, you could end up with a bigger tax hit than you expect later in life. In other words, your withdrawal order matters in 2026 (and every year thereafter, too).
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Four leading AI models discuss this article
"Optimal withdrawal order in 2026 hinges on post-TCJA tax rates and conversion opportunities the article does not model."
The article correctly flags RMD-driven tax spikes and IRMAA surcharges but glosses over Roth conversion windows in low-bracket early retirement years, state tax treatment, and the 2025 TCJA sunset that raises ordinary rates in 2026. For many retirees, front-loading traditional withdrawals can lock in higher lifetime taxes if future brackets rise or if heirs face stepped-up basis changes. The one-size-fits-all sequence also ignores QCDs for charitable giving and the option to let traditional accounts shrink via conversions before RMDs begin at 73. Without personalized modeling, the recommended order risks overpaying taxes rather than minimizing them.
For retirees already in high tax brackets or with large traditional balances and no conversion room, starting traditional withdrawals early can still blunt future RMD spikes and IRMAA costs more reliably than the article's critics allow.
"Optimal withdrawal order is tax-bracket-dependent, not universal; the article's one-size-fits-all sequencing oversimplifies and may harm high-income retirees who should prioritize Roth preservation to minimize RMD-driven IRMAA penalties."
The article's withdrawal sequencing advice—Traditional first, then Roth last—is standard but incomplete. It ignores several material variables: (1) individual tax brackets in retirement vs. working years, (2) state tax treatment differences, (3) whether RMDs (Required Minimum Distributions) will actually push you into higher Medicare IRMAA (Income-Related Monthly Adjustment Amount) brackets, and (4) the article conflates two separate problems—tax deferral and RMD timing—without quantifying when the crossover actually occurs. The 'wrong order' framing assumes everyone benefits from front-loading Traditional withdrawals, but high-income retirees might face the opposite: Roth-first minimizes future RMD pressure. The $23,760 Social Security claim is marketing noise unrelated to withdrawal sequencing.
For many middle-income retirees, the article's advice is actually correct: front-loading Traditional withdrawals before 73 (RMD age) to smooth income is mathematically sound and reduces sequence-of-returns risk. The IRMAA cliff is real but affects only ~15% of beneficiaries materially.
"Static withdrawal rules often fail to account for the tax-arbitrage potential of Roth conversions during the 'gap years' before RMDs begin."
The article correctly highlights the tax-bracket management trap, but it oversimplifies the 'Roth last' strategy. By ignoring the potential for Roth conversions during low-income years—often between retirement and the start of Required Minimum Distributions (RMDs)—the author misses a massive tax-arbitrage opportunity. If a retiree stays in a lower marginal tax bracket early in retirement, converting traditional assets to Roth can significantly lower lifetime tax liability. Furthermore, the article glosses over the 'sequence of returns' risk; if the market drops, selling taxable assets during a downturn can be more damaging than paying income tax on a smaller IRA withdrawal. Effective planning requires dynamic modeling, not a static withdrawal order.
The 'Roth last' strategy is actually the superior default for the average retiree because it maximizes the compounding of tax-free growth, which is mathematically more valuable than the marginal tax savings of early conversions.
"Dynamic, tax-rate- and market-aware withdrawal sequencing generally outperforms a static 'taxable-then-traditional-then Roth' rule in 2026."
Withdrawal sequencing is important, but the article treats it as a one-size-fits-all rule for 2026. In reality, optimal sequencing is dynamic, hinging on current vs. expected future tax rates, RMDs (73 starting age for those born after 1950), Social Security claiming strategy, and MAGI-based Medicare surcharges. A bear-market window can justify Roth conversions and taxable withdrawals to manage taxes; a strong market may favor delaying tax-advantaged withdrawals to reduce lifetime taxes. The piece omits state taxes, death-band implications, and the risk of misestimating future policy. The 'Social Security secrets' plug is marketing, not a plan.
The article’s framework is sufficient for many retirees; adding complexity only introduces mis-timing and higher costs. A fixed, simple order reduces planning risk and cognitive load, which can outperform a dynamic, assumption-heavy approach in practice.
"Post-2025 rate hikes could flip the math against passive Roth-last deferral for middle-income retirees."
Gemini's assertion that Roth-last is the superior default ignores the interaction between the TCJA sunset and RMD timing already flagged by Grok. If ordinary rates rise after 2025, retirees who delay traditional withdrawals could face permanently higher lifetime taxes on the same nominal balances, especially once IRMAA brackets are also inflation-adjusted upward. The breakeven marginal-rate increase at which early conversions lose their edge remains unquantified by any panelist.
"TCJA sunset creates a real option value for conversions, but only if the conversion tax is explicitly modeled against future RMD brackets and account growth."
Grok's TCJA sunset risk is real, but the math cuts both ways. If rates rise post-2025, early conversions lock in today's 24% rather than tomorrow's 32%—a win. But Grok hasn't quantified the conversion tax cost itself. Converting $500k at 24% costs $120k upfront; that capital drag only pays off if future RMD rates exceed ~28-30% AND the account compounds enough to offset it. Without modeling the breakeven rate AND the time horizon, claiming early conversions lose their edge remains speculative.
"Early withdrawal and conversion strategies are essential to mitigate the tax bracket compression that occurs upon the death of a spouse."
Claude, you’re missing the 'death-band' risk. If a spouse dies, the survivor inherits the IRA and is forced into single-filer brackets, which are significantly narrower. This often triggers the very IRMAA and tax spikes we are trying to avoid. Front-loading withdrawals or conversions isn't just about current tax arbitrage; it’s an insurance policy against the inevitable shift to single-filer tax brackets that happens when one spouse passes, regardless of the TCJA sunset.
"Death-band risk isn’t the primary constraint; multi-scenario, rate- and market-sensitive planning is essential."
Gemini, you overemphasize death-band risk as a universal driver of sequencing. Survivor brackets matter, but the more material and probabilistic risks are higher future ordinary rates, IRMAA cliffs, and RMD-heavy years regardless of a spouse’s death. A robust plan should model pre- and post-RMD cashflows under multiple rate and market scenarios, plus estate-step-up effects; death-band informs, but it’s not the primary constraint for most retirees. Changed mind: yes.
The panelists agree that the 'Traditional first, then Roth last' withdrawal sequencing advice is oversimplified and may not be optimal for all retirees. They emphasize the importance of personalized modeling considering individual tax brackets, state tax treatment, RMDs, IRMAA surcharges, Roth conversion windows, and sequence of returns risk.
Significantly lowering lifetime tax liability through Roth conversions during low-income years and managing taxes through dynamic modeling.
Permanently higher lifetime taxes due to the interaction between the TCJA sunset and RMD timing, as well as the 'death-band' risk of triggering IRMAA and tax spikes upon the death of a spouse.