For retirees and pre-retirees across the Piedmont Triad, including High Point, Greensboro, Winston-Salem, and Jamestown, the withdrawal question usually is not "which account first?" It is "what does each dollar I take out do to the rest of my tax picture this year and in later years?" This guide is educational. It does not recommend an allocation or a withdrawal order, and it is not tax or legal advice.
What Do Tax-Efficient Retirement Withdrawal Strategies Try to Address?
Once paychecks stop, you choose where spending money comes from. Different sources can be treated differently for federal income tax, and a single year's choices may carry into later years. Withdrawal order matters because the same spending need can produce different taxable income depending on which accounts supply it.
The table below is illustrative and general. It describes how certain kinds of withdrawals are commonly treated, not what any person should do. Individual facts, such as account basis, filing status, and age, can change the result.
| Source of money | General federal income tax treatment | Why it may matter for other rules |
|---|---|---|
| Traditional IRA or 401(k) withdrawal | Generally included in taxable income, except any portion that was already taxed (basis) | Adds to adjusted gross income, which may affect Social Security taxation and Medicare premiums |
| Qualified Roth IRA or designated Roth account withdrawal | Generally not included in taxable income if the distribution is qualified | May fund spending without adding to taxable income, subject to the rules for qualified distributions |
| Taxable account sale | Only the gain portion is generally included in income, and gains may be taxed at different rates | Realized gains add to adjusted gross income in the year of the sale |
| Qualified charitable distribution from an IRA | A direct transfer to an eligible charity by an owner at least age 70½ is generally excluded from gross income | May count toward a required minimum distribution, but has eligibility and dollar limits |
Some households consider spending from one account type first and others blend sources across years. Each approach involves trade-offs, and which one fits depends on the facts. Our ring of fire article looks at why the conventional sequence may not always minimize lifetime taxes.
How Do Tax Brackets Affect Retirement Withdrawals?
The federal income tax is applied in layers. A higher bracket applies only to the portion of income that falls in that layer, not to all of your income. (Source: IRS, Federal income tax rates and brackets) Bracket thresholds are adjusted periodically, so current figures should be confirmed on IRS.gov or with a tax professional rather than taken from an article.
Bracket management means looking at how much taxable income a year may include and what sits near the edge of a bracket. Two things can make this less simple than it sounds:
- A withdrawal taxed at your stated bracket may also change how much Social Security is taxable or which Medicare premium tier applies.
- Income in one year can look different from income in another. A year with a large one-time sale or a conversion may sit in a different bracket than a quiet year.
Because the same dollar can reach several rules at once, many planners look at the effective cost of the next dollar, not only the bracket on the tax table.
How Do RMDs Change the Withdrawal Sequence?
Required minimum distributions are the minimum amounts you generally must withdraw each year from traditional IRAs and most workplace plans once you reach the required age. According to the IRS, withdrawals are included in taxable income except for any part that was already taxed or that can be received tax-free, and Roth IRAs do not require withdrawals during the original owner's lifetime. (Source: IRS, Retirement plan and IRA required minimum distributions FAQs)
For withdrawal planning, the point is that an RMD may fill part of your taxable income whether or not you need the money. That can reduce the flexibility you had before RMDs began. Some households look at the years before RMD age, when they have more control over how much taxable income to recognize, and discuss that with their advisor. Whether that helps depends on balances, other income, and future tax rules.
The starting age depends on your birth year and was changed by SECURE 2.0. Our RMD guide for retirees covers starting ages by birth year and how the IRS percentages work, and the IRS page above lists the current age. If you want to see how required distributions may look over time, the RMD and stretch projection calculator can illustrate that.
How Do Social Security and Medicare Affect Withdrawal Planning?
Social Security taxation
Part of your Social Security benefit may be taxable depending on your "combined income," which the IRS describes as half of your benefits plus your other income, including tax-exempt interest. For 2025 returns, the IRS lists base amounts of $25,000 for single filers and $32,000 for joint filers, with a second tier at $34,000 and $44,000. Between the tiers up to 50% of benefits may be taxable, and above the second tier up to 85% may be taxable. These percentages describe how much of the benefit is included in income, not the tax rate. (Source: IRS Publication 915)
Medicare premiums and IRMAA
Higher-income Medicare enrollees may pay an income-related monthly adjustment amount on Part B and prescription drug coverage, based on modified adjusted gross income from a tax return filed earlier. (Source: Social Security Administration, Medicare premiums) For 2026, CMS lists the standard Part B premium at $202.90 per month, and the first income threshold at more than $109,000 for individuals and more than $218,000 for joint filers. (Source: CMS, 2026 Medicare Parts A and B premiums and deductibles) Because the income year used is typically two years earlier, a withdrawal made this year may affect premiums in a later year.
These figures change, so confirm current amounts with the agencies above before acting. Our retirement tax ring of fire article walks through how these effects can overlap.
What Questions Should You Model Before Changing Withdrawals?
A projection can put numbers on trade-offs that are hard to see from a single year's return. Questions worth bringing to a tax professional and financial professional include:
- What does my taxable income look like this year and in each of the next several years under more than one withdrawal approach?
- How close am I to a bracket edge, a Social Security taxation tier, or a Medicare premium threshold?
- When do required distributions begin for me, and how large might they become?
- What would change if one spouse passed away and the survivor filed as a single taxpayer?
- How might planned charitable giving, a Roth conversion, or a large one-time expense change the picture?
- How do North Carolina income tax rules treat each source of income for me?
- Which assumptions, such as returns, inflation, and spending, is the projection most sensitive to?
The retirement distribution calculator lets you test how long savings may last under different withdrawal amounts and assumptions. It is an educational estimate, not tax advice, and it does not model every tax rule discussed above.
If you would like to talk through these questions, we can set up a 30-minute conversation at /schedule. You can also read about our retirement income and tax planning services.
Sources
- IRS, Retirement plan and IRA required minimum distributions FAQs: irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits: irs.gov/publications/p915
- IRS, Federal income tax rates and brackets: irs.gov/filing/federal-income-tax-rates-and-brackets
- IRS, Publication 590-B, Distributions from Individual Retirement Arrangements: irs.gov/publications/p590b
- Social Security Administration, Medicare premiums: ssa.gov/benefits/medicare/medicare-premiums.html
- CMS, 2026 Medicare Parts A and B premiums and deductibles: cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
Rules, thresholds, and premiums were checked against these sources on September 30, 2026 and may change.
This article is general information, not individualized investment, tax, or legal advice, and it does not account for your circumstances. Tax rules referenced are those in effect at the date shown and change over time. Consult a qualified professional before acting.