Which account to withdraw from first: sequencing taxable, traditional and Roth money

If you have money in several kinds of accounts, every dollar you spend has to come from somewhere, and where it comes from changes the tax you pay, the Medicare premiums you're charged and how long each account lasts. Runway's Withdrawal Plan page shows this each year, and the ? beside Withdrawal order gives the short version. This guide gives the long one: the order, the reasoning, and what the sequence does in a worked example.

What is the usual order, and why?

The rules follow the way each account is taxed:

1. Required distributions first. Traditional accounts require withdrawals starting at 73 (or 75 for people born in 1960 or later); the IRS says Roth IRAs have no such requirement during the owner's life, as in the RMD guide. The RMD is taxable income whether you spend it or not, so you take it first and count it toward spending.
2. Cash. Spending cash triggers no tax.
3. Taxable brokerage. Selling investments triggers tax only on the gain, and gains held more than a year are taxed at 0%, 15% or 20% instead of ordinary rates. For a couple with modest other income that rate can be zero (see the capital-gains guide).
4. Traditional accounts. Every dollar is ordinary income. Runway doesn't wait until it has to: it draws from them up to the top of a chosen bracket each year, so cheap brackets are used rather than saved up for a larger tax bill later.
5. Roth accounts last. Withdrawals are tax-free, there are no required distributions, and the growth is tax-free, so a Roth dollar is worth the most when it's left alone, and is also the simplest thing to leave to heirs.

How much does the source matter in a single year?

Take the first year of the sample couple's plan (Pat 65, Alex 64, no Social Security yet, no other income) and ask what it costs in federal tax to end up with $95,000 of spendable cash from each kind of account on its own. The brokerage account has a cost basis of 60% of its value, so 40% of every sale is gain.

The brokerage sale costs nothing because the gain is small enough to fall in the 0% capital-gains bracket. The traditional withdrawal costs $7,775 and has to be bigger than $95,000 to cover its own tax. Single-year snapshots flatter the cheap sources, though, because the traditional money doesn't disappear. It keeps growing and gets a required distribution later, which is why the real comparison runs across the whole plan.

What does a whole retirement look like?

Here is what Runway's engine does for the same couple year by year, with Pat claiming Social Security at 69 and Alex at 68, spending $95,000 a year, no Roth conversions, with the long-term-care cost left out:

The order shows up cleanly: cash and brokerage first, traditional money as the brokerage account runs out, required distributions once they start, and the Roth account untouched throughout. At 95 the couple has $669,977 in Roth money and $1,159,786 still in traditional accounts, with lifetime federal tax of $282,822. (Those are the amounts that make Roth conversions worth testing: $1.16 million of tax-deferred money is a lot of future ordinary income.)

Does drawing from traditional accounts early actually help?

That is the design choice behind the bracket ceiling, so it is worth testing. In the engine you can set how high a bracket the traditional withdrawals are allowed to fill each year. Over the whole plan, the default ceiling and anything from 12% up give identical results ($282,822 of lifetime tax). Cutting the ceiling to 10% means the plan takes less from traditional accounts early and spends Roth money sooner:

Being too stingy with traditional money costs $17,057 of extra lifetime tax and about $246,000 of Roth balance. The ceiling matters only at the low end here because the couple's spending already requires enough traditional withdrawals; a household with more traditional money relative to spending would see the ceiling bite higher up.

When doesn't the standard order hold?

• You're in a very low bracket now and expect a higher one. Then converting or drawing traditional money first can beat saving it, which is what Roth conversions do deliberately.
• You're managing income for health insurance. Before Medicare, your income sets the size of your ACA subsidy; after 65, it can set a Medicare surcharge two years later. Both reward keeping income in particular ranges, which can change which account is cheapest to use this year.
• You have a large embedded gain in a taxable account, or want to leave highly appreciated assets to heirs, who may receive a stepped-up basis. That can argue for spending other money first.
• You'd rather leave Roth money to heirs than to spend it. The standard order already does that.

What does this leave out?

• A rule, not an optimizer. The engine re-applies the same sequence each year (the engine's own documentation calls it a greedy waterfall); it doesn't search for the order that minimizes lifetime tax. The next-year effects of today's choice, like the size of future RMDs, are only handled by the bracket ceiling and by Roth conversions.
• HSA balances have a narrow job. The plan draws an HSA only for Medicare premiums and long-term-care costs, ahead of everything above (see the HSA post).
• RMD start age. The engine starts required distributions at 73 for everyone. People born in 1960 or later actually start at 75, so for them the real first RMD comes two years later than the plan shows.
• Heirs' taxes. The plan doesn't weigh the tax rates of whoever inherits traditional versus Roth money.
• State tax, unless you set a state in Runway's Pro settings, and the tax treatment of inherited accounts.
• Sample-specific results. A household with different balances, ages or spending will see a different sequence.

How were these numbers computed?

Everything comes from Runway's engine on the sample couple, married filing jointly, 2026 federal brackets, plan through age 95, default 60/40 return assumptions, Pat claiming Social Security at 69 and Alex at 68. The single-year table finds, for each source, the withdrawal that leaves $95,000 after federal tax with one spouse 65 or older and the 2026 standard deduction. The bracket-ceiling table varies the engine's target bracket for traditional withdrawals. Amounts are in today's dollars.