Which Retirement Funds To Tap First

So you’re an old geezer and you’re ready to start enjoying all the money you saved up for retirement. If you’re under 70.5, this is the order you should spend your assets in, according to the Autumn 2007 Vanguard report:

1. Taxable
2. Tax-deferred (from traditional IRAs or 401(k) and other employer plans)
3. Tax-free (from Roth IRAs or Roth employer plans)

The idea is that you want your tax-free income to have the chance to grow and compound as much interest as possible before tapping it. After you’re 70.5, the IRS requires you to withdraw a certain amount from your employer plans and traditional IRAs. You’ll want to spend those withdrawals down first before tapping into your taxable accounts.

(Photo: saramarie)


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  1. gibbersome says:

    Makes alot of sense. BTW, Vanguard Retirement plans are the best I’ve seen thus far.

  2. jmorgans says:

    I’m not even close to retirement, but it seems to me that the best way to tap a combination of Roth and traditional retirement accounts is to use both in any given year, minimizing taxes. For example, if I need $60K to live on and the tax bracket cutoff is at $40K, I would take $40K from a traditional IRA and $20K from the Roth.

  3. sleze69 says:

    Wasn’t this posted a couple days ago?

  4. kimdog says:

    deja vu all over again.

  5. BigNutty says:

    Vanguard’s advice seems solid but I fell like I’m in the twilight zone. I would still tap the money in my mattress first.

  6. Jeff_McAwesome says:

    I’ll keep this in mind. It’ll come in useful in 50.5 years.

  7. ColoradoShark says:

    @Jeff_McAwesome: That gives you 50.5 years to save. Don’t miss out on the awesomeness of compound interest over that amount of time.

  8. rhombopteryx says:

    Ben, gotta link to the report so we can read it!

    All this discussion about what order to withdraw from accounts leaves a BIG issue unaddressed – when and if to take Social Security benefits. That can have a huge impact on taxation and timing. UPenn. has an independent think tank that writes on just these topics.