Where Should You Pull Funds from First in Retirement?

How you choose to withdraw your retirement funds can significantly affect the taxes you pay and how long your savings last. Should I pull from first -- my Traditional IRA, ROTH IRA or Taxable Account?

In this video, we look at a realize case study to help make this important decision — and we even give you free access to the same tool financial advisors use. This information is particularly useful for those nearing retirement or who have just retired, offering crucial tips to maximize your retirement savings.

NOTE -- I ask a couple of questions, but feel free to scroll past the questions -- not required for the link.

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*ABOUT ME*

I’ve always been passionate about personal finance, investing, real estate, and helping people find the freedom to live their life with purpose. But when my dad died in 2015, I tried to help my Mom find an advisor to sort out her finances. Instead of a helping hand, I found an industry of financial advisors dominated by glorified salespeople working on commission — pushing products that were not in my mother’s best interest. Or advisors with minimums that shut-out all but the ultra wealthy. Disappointed with the options, I took matters into my own hands and launched Foundry Financial, a wealth management firm with transparent pricing that specializes in helping provide clarity around money — so you have the confidence to make smart decisions.My goal is to help a million people retire without worry!

📅 *THE BASICS OF RETIREMENT PLANNING*

Retirement planning has several steps, with the end goal of having enough money to quit working and do whatever you want. Our goal is to help people master retirement and retire without worry.

Step 1: Know when to start retirement planning. When should you start retirement planning? The earlier you start planning, the more time your money has to grow. That said, it’s never too late to start retirement planning. Even if you haven’t so much as considered retirement, don’t feel like your ship has sailed. Every dollar you can save now will be much appreciated later. Strategically investing could mean you won't be playing catch-up for long.

Step 2: Figure out how much money you need to retire, The amount of money you need to retire is a function of your current income and expenses, and how you think those expenses will change in retirement.

Step 3: Prioritize your financial goals. Retirement is probably not your only savings goal. Lots of people have financial goals they feel are more pressing, such as paying down credit card or student loan debt or building up an emergency fund.Generally, you should aim to save for retirement at the same time you're building your emergency fund — especially if you have an employer retirement plan that matches any portion of your contributions.

Step 4: Choose the best retirement plan for youA cornerstone of retirement planning is determining not only how much to save, but also asset allocation. It can make a massive difference in your retirement plan.

Step 5: Select your retirement investments. Retirement accounts provide access to a range of investments, including stocks, bonds and mutual funds. Determining the right mix of investments depends on how long you have until you need the money and how comfortable you are with risk. It’s often helpful to talk with an adviser to discover the right mix of stocks and bonds.

❣ *SPONSORED* No, this video was not sponsored.

⚠️ "DISCLAIMER:⚠️This is not financial or investment advice. This Channel is meant for EDUCATIONAL AND ENTERTAINMENT PURPOSE only. None of this is meant to be construed as investment advice, it's for entertainment purposes only. #retirementplanning #retirement #passiveincome

[foundryfinancial]

What is your strategy for deciding what account to pull from?

[ElijahOliver-tu]

I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.

[ron]

Interesting, but the figures are so far above where I think we will be that it lost relevance and I started tuning out. Perhaps you could do one like this for the common worker.

[wwz]

Been using taxable accounts since I retired early. This will continue until I hit the RMD age. Then RMDs will exceed living expenses. Roths will likely never be touched. Will claim SS at 70. So between SS, small pension, and RMD, I am fine.

[michaeleames]

There sems to be a focus here on minimizing the taxes rather than maximizing the after- tax wealth. The latter is to be preferred. It becomes rather complicated when considering the fact that wealth is inheritable and for some accounts you must consider your life expectancy and the tax rates of those inheriting your wealth.

[yorbalindason]

A friend died last month at 64 and collected $0 from retirement and SSN. Never retired. Always seems questionable to miss out on 10 years SSN as you bet you’ll live to 70. My wife died at 50. Neither of my parents lived past 65. We don’t all live forever.

I understand there’s math involved but seems that using SSN earlier uses “other people’s money” such as the governments payments to you v drawing down more of you so called own money in your retirement accounts. Though it’s clear it’s not “your money” because unless you spend it all you never use what you saved all your life - it’s for your heirs then.

[albertlarry]

I came across your channel through this video—case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[Wayneman]

I think you missed the boat on someone who retires early. I retired at 61 1/2. I have 3 1/2 yrs until i can go on medicare. Healthcare is the number 1 thing i will not skimp on. Going through the ACA plans, the subsidies are tied to your gross income, this also includes your spouse. In order to get a decent policy under $500/month we had to cap our income at 40 grand. That means no roth conversions, no ira withdrawls. I planned this a few years ahead and stock piled enough cash to pay bills for 3 1/2 years.
So, sometimes one does not really have a choice. Btw, the policy without subsidies was $1325/month.
I also waited to retire until my wife hit 65 and went on medicare. She has a cancer history which is a whole other ball of wax.

[jtixtlan]

You sound very knowledgeable and strategic and this seems like sound advice. You also seem out of touch in terms of being relatable. The “typical” family does not have $1M saved for retirement. The “average” retiree does not collect $4K per month. Try cutting those numbers in half, and then some.

[RafaelSantander-zcdd]

I have dreamed of making more than $200, 000 in income all my life and would not care getting hit with high tax rate but that dream never comes true, now that I have a chance in retirement to make that dream comes true without even working that is already a pretty good deal. I will just sleep through this tax issues and enjoy life then when I have time and I may do something about it with the information provided here, thank you Kevin

[bruceanderson]

We opted to draw from our regular investment account first. We retired at 62 and were relying on ACA provisions for health insurance. By using our regular investment account it kept our Modified Adjusted Gross Income (MAGI) low. As a result our health insurance was highly subsidized and we had zero taxes. We figure we avoided close to $10k a year in health insurance and tax expenses for 3 years. We started income streams at age 65 in conjunction with Medicare coverage. We also made Roth conversions up to bracket creep starting at age 65 and will continue to do so until RMD age. These are the only transactions we've conducted with our IRAs.

[FoxxStar]

This is why I’m focused on maximizing my ROTH accounts over a 401k.

[ambroinaz]

This was a really helpful and clear lesson on tax strategy and withdrawal order. Thanks!

[azwileetoyote]

Subscribed 🙂 I've downloaded and played with the tool (so thanks for that) and compared it to the Fidelity retirement calculator I've used the past 5 years or so. The tax (and Roth conversion) information in this tool is non-existent in the Fidelity tool ( my guess is on purpose) but their income and expense details are so much more comprehensive allowing you to add or change particular items and amounts on a year by year basis. Looks like I'll be using both tools now until I find the 'one tool to rule them all' (haha, sorry about the poor dad joke). I've been early retired (55) coming up on two years and am still trying to navigate the nuances of budgeting and optimization until my wife retires around the end of the year. I've watched about 3 or 4 of your video's and realize you're definitely in the top 3 of the dozen or so I've watched or seen over the years. Keep up the great content.

[paulab]

We pull from tax deferred accounts until we hit the spot where the 2nd level of IRRMA kicks in and then we pull the rest from ROTHs since that extra 4% the 2nd level of IRRMA cost essentially gives us 4% more on the ROTH. Not pulling a lot from the ROTH, but some.

[Mialovesphoto]

THis was exactly what I was looking for. Tax repercussions! I grew up in Silver Lake! I saw you are around the corner!

[mattlaeff]

Here is the deal: I don't have a car. I don't have cable or any streaming services or subscriptions. I never eat out -- breakfast, lunch, or dinner. I don't drink anything but water --- ever. I don't gamble, smoke, or do any drugs. I don't go on vacations. No coffee or booze, as noted earlier. I don't use the internet to buy anything -- ever. Practice this and you can easily live off of about 20k a year -- not the 100k noted in the video. Practice this, and truly retire early or retire stress free. What I do: Library, outdoor exploring/hiking, Reading, Exercise, Cook, Love.

[franksenkel]

if you retire early you will need healthcare and the cap gains impact your aca magi income and hence your subsidy. fidelity offers a tax managed account the washes the gains out of the portfolio while tracking an index...helpful for income planning with regard to aca magi...healthcare cost is a huge factor when retiring early....

[valeriet]

This is invaluable info! Hope you do hourly consults. This is the missing piece to our retirement plan, along with protentional ROTH conversion.

[Will]

I retired at 55 so I have access to my 403B without the 10# penalty. I take 50% from 403B and 50% from my brokerage account.. the last account I would touch is my Roth IRA