Which account should I withdraw from first?
Spend cash first, then taxable brokerage, then traditional 401(k), 403(b) and IRA money, then Roth, and the HSA last. The account you spend first changes how much tax you pay, how much of your Social Security is taxable, what you pay for Medicare two years later, and how long the money lasts. Enter your balances to see the tax-aware order Planomy's own engine uses — cash first, tax-free Roth and HSA money last — the reason behind each step, and the situations where the conventional order is the wrong answer. Everything runs in your browser.
A general rule of thumb, not tax advice. The best order depends on your bracket, required minimum withdrawals (RMDs), Social Security timing, and state taxes — talk to a professional before large withdrawals.
Why this order?
The goal is to spend the least-costly dollars first and let tax-free accounts keep compounding as long as possible:
- Cash first — already taxed, earns little, no market risk to realize.
- Taxable brokerage next — you're only taxed on gains, often at lower long-term capital-gains rates.
- Traditional (pre-tax) 401k/IRA — fully taxed as income, so drain it before Roth; doing so also shrinks future required minimum distributions.
- Roth last — tax-free growth and no RMDs, so it's the most valuable to leave untouched (and to inherit).
- HSA last of all — tax-free for medical costs; save it for later-life healthcare.
Where the conventional order goes wrong
Spending strictly in that order is the right default, and it is the wrong answer for a large minority of retirees. The failure mode is always the same: it leaves low tax brackets empty in your sixties and then forces high ones in your seventies.
Here are the 2026 numbers that decide it. A married couple filing jointly gets a $32,200 standard deduction, and the 10% and 12% brackets run to $100,800 of taxable income. So they can take roughly $133,000 of ordinary income in a year and never leave the 12% bracket. For a single filer it's a $16,100 deduction plus $50,400 of taxable income, about $66,500.
Now picture a couple who retire at 62 and live purely off taxable savings until Social Security and RMDs both switch on. They pay almost nothing for eight years — and then, from 73, RMDs plus two Social Security checks push them permanently into the 22% or 24% bracket. Every one of those eight years had over $100,000 of 12%-bracket room that expired unused.
The fix is not to abandon the order but to fill the bracket each year: take enough from the traditional account (or convert it to Roth) to reach the top of the 12% band, and fund the rest of your spending from taxable and cash. You pay a little tax voluntarily now to avoid a lot involuntarily later.
The thresholds that make withdrawals cost more than the rate
Marginal rate isn't the whole cost of a withdrawal. Four thresholds turn an extra dollar of income into more than a dollar of consequence:
- Social Security taxation. Once provisional income (AGI plus tax-exempt interest plus half your benefit) passes $25,000 single or $32,000 joint, 50% of your benefit becomes taxable; past $34,000 / $44,000 it's 85%. These figures have never been indexed for inflation. In the phase-in range, one extra dollar of IRA withdrawal can drag up to 85 cents of benefit into tax with it — the so-called tax torpedo, which can push an effective marginal rate well above the bracket you think you're in. Roth withdrawals aren't part of provisional income at all.
- Medicare IRMAA. Surcharges are cliffs, not ramps, and use your MAGI from two years earlier. In 2026 the first tier starts at $109,000 single / $218,000 joint. One dollar over adds the full tier's surcharge to both Part B and Part D premiums for the whole year.
- The 0% capital gains bracket. Long-term gains are taxed at 0% while total taxable income stays under $49,450 single / $98,900 joint in 2026. Ordinary withdrawals stack underneath and push gains out of that band, so a traditional IRA withdrawal can cost 12% on itself plus 15% on gains you'd otherwise have realised free.
- ACA premium subsidies if you retire before 65. Marketplace credits taper with MAGI, so the effective cost of an extra withdrawal in your early sixties can be far higher than the bracket suggests.
Before 59½: the 10% penalty and its exceptions
Withdrawing from tax-advantaged accounts before 59½ generally adds a 10% penalty on top of income tax, which is why cash and taxable accounts carry the early years. The exceptions that matter most for early retirees:
- Roth contributions come out first. Roth IRA withdrawals follow a fixed order — your own contributions, then converted amounts, then earnings — and contributions can be withdrawn at any age, tax and penalty free.
- The rule of 55. Leave your employer in or after the year you turn 55 and you can take penalty-free withdrawals from that employer's 401(k). It does not apply to IRAs — so rolling the plan to an IRA on your way out forfeits it.
- 72(t) / SEPP. A series of substantially equal periodic payments from an IRA avoids the penalty, but it must run for five years or until 59½, whichever is longer, and modifying it retroactively reinstates the penalties.
- Conversion ladder. Amounts converted to a Roth IRA can be withdrawn penalty-free five years after each conversion, which is what makes a Roth conversion ladder work for early retirement.
- Other exceptions include disability, unreimbursed medical expenses above 7.5% of AGI, up to $10,000 toward a first home from an IRA, higher-education costs from an IRA, and birth or adoption expenses.
Taxes on a 403(b), 457(b) or TSP withdrawal
A 403(b) withdrawal is taxed exactly like a traditional 401(k) withdrawal: the whole amount is ordinary income in the year you take it, at your marginal rate, plus the 10% early-withdrawal penalty before 59½ unless an exception applies. The same is true of a 457(b), a TSP and a SIMPLE or SEP IRA. So enter those balances in the traditional field above — the ordering and the tax arithmetic do not change.
Two differences are worth knowing. A governmental 457(b) has no 10% early-withdrawal penalty once you separate from service at any age, which makes it the natural first tax-deferred account to tap in an early retirement. And the rule of 55 applies to a 403(b) or TSP the same way it applies to a 401(k) — leave that employer in or after the year you turn 55 and withdrawals from that plan skip the penalty, a break you forfeit by rolling the plan into an IRA on your way out.
The HSA withdrawal penalty, and when it disappears
A non-qualified HSA withdrawal before 65 is taxed as ordinary income and carries a 20% penalty — double the 10% that applies to a traditional IRA, and the reason the HSA sits last in the order. Withdrawals for qualified medical expenses are tax-free at any age, with no deadline: keep the receipt and you can reimburse yourself years later.
At 65 the 20% penalty disappears entirely. From that point a non-medical HSA withdrawal is simply ordinary income, which makes an unspent HSA no worse than a traditional IRA and considerably better if you still have medical costs ahead. Enrolling in Medicare stops you contributing but never stops you spending the balance. Our HSA contribution calculator covers the paying-in side and the 2026 limits.
Two things the default order gets right and people still get wrong
- The HSA is last for a reason, and it has a trick. There is no deadline for reimbursing yourself for a qualified medical expense — keep the receipts and you can withdraw tax-free years later. After 65, non-medical withdrawals are taxed as ordinary income but carry no penalty, so a leftover HSA is simply a traditional IRA at worst.
- The taxable account gets a step-up in basis at death. Heirs generally inherit it at market value with the unrealised gain wiped out, while an inherited traditional IRA hands them a taxable 10-year drawdown. If leaving money behind is a goal, that flips part of the ordering.
The mistakes that cost the most
- Wasting the gap years. Between retiring and RMDs is the cheapest tax window you will ever have. Spending it entirely from taxable savings is the single most expensive default in retirement planning.
- Rolling a 401(k) to an IRA at 55. It quietly destroys the rule-of-55 exception.
- Selling taxable holdings without choosing lots. Identifying high-basis shares realises a smaller gain than the broker's default FIFO.
- Crossing an IRMAA line by a few dollars in December. The surcharge is a cliff, applies for a full year, and arrives two years later when you've forgotten why.
- Draining traditional accounts to zero and living only on Roth. That wastes the standard deduction and the 10% bracket every year — income you could have taken at almost no tax.
- Ignoring your state. Several states exempt retirement income entirely, and some tax it fully. Moving, or timing a large withdrawal around a move, can matter more than the federal ordering.
Frequently asked questions
Which account should I withdraw from first in retirement?
As a default: cash, then taxable brokerage, then traditional 401(k) and IRA, then Roth, and the HSA last. That order spends already-taxed, low-growth money first and leaves the tax-free accounts compounding longest. It is a starting point, not a rule — most retirees should also take enough from traditional accounts each year to use up their low tax brackets.
How much tax do I pay on a 403(b) withdrawal?
The full withdrawal is ordinary income at your marginal rate, the same as a traditional 401(k) — there is no separate 403(b) tax rate. Before 59½ add a 10% early-withdrawal penalty unless an exception applies, including the rule of 55 if you left that employer in or after the year you turned 55. Enter a 403(b) balance in the traditional field above and the calculator treats it correctly.
What is the penalty for an HSA withdrawal?
Before 65, a withdrawal that is not for a qualified medical expense is taxed as ordinary income plus a 20% penalty. Medical withdrawals are tax-free at any age. At 65 the 20% penalty stops applying, so a non-medical withdrawal is then taxed like any traditional IRA distribution.
Should I always spend taxable accounts before retirement accounts?
No. Taxable money is usually spent early because only the gains are taxed, but spending only taxable money leaves the standard deduction and the 10% and 12% brackets unused every year. A married couple in 2026 can take about $133,000 of ordinary income and stay within the 12% bracket. Filling that room with traditional withdrawals or Roth conversions before RMDs start usually beats a strict ordering.
What is the tax torpedo?
The range where each extra dollar of income also drags up to 85 cents of Social Security benefit into taxable income, pushing your effective marginal rate well above your stated bracket. It bites once provisional income passes $25,000 single or $32,000 joint — thresholds that have never been adjusted for inflation. Roth withdrawals don't count toward provisional income, which is what makes them useful here.
Can I withdraw from a 401(k) before 59½ without a penalty?
Sometimes. If you leave your employer in or after the year you turn 55, that employer's 401(k) is available penalty-free under the rule of 55 — but rolling it into an IRA first destroys the exception. A 72(t) series of substantially equal periodic payments works from an IRA, as do disability, large medical costs, and a Roth conversion ladder after each conversion's five-year clock.
Does this replace personalized tax planning?
No. This calculator gives a planning framework, not tax advice. Real withdrawal plans shift with RMDs, Medicare IRMAA surcharges, Social Security taxation, ACA subsidies, state taxes, and what you intend to leave behind.
Find the bracket room you're leaving on the table
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