Originally published October 2015. Last updated March 2026.
You spent decades saving. Now the question is how to get the money out without giving more to the IRS than you have to.
The order you pull from different accounts, and the timing, can mean the difference between a 12% and a 24% effective tax rate on the same amount of income. Here are four strategies worth considering.
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1. Use the 0% Capital Gains Bracket
In 2025, married couples filing jointly with taxable income up to $96,700 (single filers up to $48,350) pay 0% federal tax on long-term capital gains and qualified dividends. Zero.
If you’re in early retirement and your ordinary income is low — maybe you’re living off savings before Social Security kicks in — you can sell appreciated stock in a taxable brokerage account and pay no federal tax on the gains.
This is a narrow window. Once RMDs start or Social Security begins, your taxable income usually pushes you above the threshold. Use the low-income years strategically.
2. Draw from Accounts in the Right Order
The conventional wisdom is to withdraw from taxable accounts first, then tax-deferred (traditional IRA, 401(k)), then Roth last. The logic: let tax-advantaged accounts grow as long as possible.
But conventional wisdom isn’t always right. Here’s when to deviate:
- Low-income years: Pull from your traditional IRA to “fill up” lower tax brackets, even if you don’t need the money. This reduces future RMDs.
- High-income years: Draw from your Roth to avoid stacking taxable income and triggering Medicare surcharges (IRMAA).
- Capital gains opportunities: Sell taxable account holdings when you’re in the 0% or 15% bracket.
The optimal sequence changes year to year based on your income, bracket, and what other events (Social Security start, property sale, RMD age) are happening.
3. Roth Conversions Before RMDs
The years between retirement and RMD age (73 or 75) are often your lowest-income window. Converting traditional IRA funds to a Roth during this period means:
- Paying tax at a lower rate than you’d pay later
- Shrinking your traditional IRA balance, which reduces future RMDs
- Building a pool of tax-free income for later years
We typically model converting “up to the top of the 22% or 24% bracket” each year. The exact amount depends on your other income sources.
4. Qualified Charitable Distributions (QCDs)
If you’re 70 and a half or older and give to charity, QCDs are one of the most tax-efficient moves available. You donate up to $105,000 directly from your IRA to a qualified charity. The distribution counts toward your RMD but isn’t included in your taxable income.
Compared to taking the RMD, paying tax on it, and then donating from your bank account, a QCD saves you the income tax on the entire distribution amount. If you’re in the 22% bracket, a $10,000 QCD saves you $2,200 in federal income tax.
FAQ
When should I start Social Security?
It depends on your health, other income sources, and whether you’re married. Each year you delay past 62 increases your benefit by about 6-8% per year, up to age 70. That’s guaranteed. But if you need the income or have health concerns, earlier can make sense. There’s no one-size-fits-all answer.
How do I avoid the Medicare surtax (IRMAA)?
IRMAA surcharges kick in when your modified adjusted gross income exceeds $106,000 (single) or $212,000 (married) in 2025. Manage your income sources to stay below the threshold in the two-year lookback period. Roth withdrawals don’t count toward MAGI.
Should I take my RMD in January or December?
If you expect your account to grow, taking it in January means a smaller distribution. If you’re doing Roth conversions, you might take the RMD first to lower the IRA balance, then convert additional amounts. The timing matters less than the overall strategy.
Schedule a free 20-minute consultation to build a withdrawal strategy tailored to your accounts and tax situation.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
