Tue Oct 29 2024, by Tyler Gardner

Optimizing Retirement Account Withdrawals for Tax Efficiency and Long-Term Growth

If I retired at 60 and wanted to optimize withdrawals for my accounts for tax efficiency and long-term growth, here's exactly how I'd do it.

Hello, I'm Tyler, a former financial advisor and portfolio manager. Now, I create financial content for free so that you don't have to pay for it.

1. Emergency Fund

I would start by ensuring I had an emergency fund. It should be in a liquid account with cash or money market equivalents, providing me with the flexibility to supplement my withdrawals.

2. Health Savings Account

Next, I'd draw down my health savings account for all my health needs. In my 60s, I'm guessing this will come in handy. All tax-free, all accessible, and I’ve let this one grow uninterrupted since my 30s.

3. Roth IRA

If I didn't want to leave this one to my beneficiaries or include it in my estate planning, I'd target my Roth IRA next. Withdrawals from this account after age 59 ½ are all 100% tax-free, allowing my tax-deferred accounts to continue to grow.

4. Brokerage Accounts

Next, I’d draw down from my brokerage accounts. While they are taxed, it’s at a much lower rate than ordinary income. I can supplement my annual withdrawals when I'm in a lower tax year.

5. Pre-Tax Withdrawals

Finally, I'd take those pre-tax withdrawals that I have to take at some point. These are always going to be subject to ordinary income tax. I want to delay these withdrawals as much as possible because, hopefully, I'm spending less and less as I age, which could lead me to lower tax brackets as my go-go years turn into my bingo years.

If any of this is helpful, like and follow, and I'll keep trying to guide you closer to where you need to be.