Short answer: in retirement, which accounts you withdraw from — and in what order — can change your lifetime tax bill by a surprising amount. Blending withdrawals across your taxable, tax-deferred, and Roth buckets, and using the low-income years before Social Security and required distributions kick in, is where real money is made or lost. It’s tax planning, not just spending.
The three tax buckets
Most retirees hold money in three types of accounts: taxable (brokerage — you owe tax on gains and income), tax-deferred (401(k)/traditional IRA — withdrawals taxed as ordinary income), and Roth (already taxed — qualified withdrawals are tax-free). Each behaves differently, and the art of a withdrawal strategy is deciding how much to pull from each, each year.
Why not just drain one account at a time?
The old rule of thumb — spend taxable first, then tax-deferred, then Roth — is simple but often tax-inefficient. Blending withdrawals to “fill up” lower tax brackets each year, rather than lurching between very low and very high income, frequently produces a smaller lifetime tax bill. The goal is smooth, deliberate income, not accidental tax spikes.
Why do withdrawals look different before and after Social Security?
What are RMDs and why do they matter?
Required minimum distributions force you to start withdrawing from tax-deferred accounts at a set age, whether you need the money or not — and they’re taxed as ordinary income. A large tax-deferred balance can create big, unavoidable RMDs later. Drawing down or converting some of that balance during the low-income years can soften the hit, which is why the strategy has to look ahead, not just at this year.
How should a dentist approach this?
Treat withdrawals as a multi-year tax project coordinated with your CPA, integrated into your broader retirement paycheck. The right sequence is personal and changes year to year with tax law, markets, and your income. This is general education, not individualized tax advice — the specifics belong in a plan built for your situation.
Frequently asked questions
Rather than strictly draining taxable, then tax-deferred, then Roth, many retirees do better blending withdrawals to fill up lower tax brackets each year. The low-income years before Social Security and RMDs are especially valuable for tapping tax-deferred accounts or doing Roth conversions at low rates. The best sequence is personal and best set with your CPA.
Before Social Security and required minimum distributions begin, your taxable income is often low, giving you room to withdraw or convert at low tax rates. Once Social Security and RMDs start, your taxable income rises, so you generally rely less on account withdrawals and lose that low-tax window — which is why the years in between are so valuable for planning.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
Keep reading
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- The big tax mistakes retirees make (and how to avoid them)Taxes don’t stop in retirement — they change. The most common and costly tax mistakes retirees make, from RMD surprises to poor withdrawal timing.
- When should a dentist claim Social Security?Claiming Social Security early, at full retirement age, or at 70 changes your benefit for life. How dentists should think through the timing decision.