Which account you draw from first — not how much you withdraw — can be worth hundreds of thousands of dollars over a retirement. Season 2 opens with the least-discussed, highest-impact decision in retirement income planning.
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Episode 9 — The Order Matters: Decumulation Sequencing
Most people spend thirty years learning how to put money in.
Almost nobody teaches you how to take it out.
Not how much to take out — that conversation gets plenty of airtime. The order. Which account first. Which source second. Which bucket you leave untouched until the last possible moment — and why the wrong answer to that question can cost you more than a bad market year.
The sequence of your withdrawals is as important as the size of them. Maybe more.
In Episode 9, Tod Long opens Season 2 with one of the least-discussed, highest-impact decisions in retirement income planning: decumulation sequencing. Not a rule to follow — a discipline to maintain, year by year, against your actual tax bracket, for the full length of your retirement.
You retire at 65 with three accounts: a traditional IRA at $800,000, a Roth IRA at $200,000, and a taxable brokerage account at $150,000. You need $60,000 a year in withdrawals beyond your guaranteed income. Which account do you draw from?
Most people answer with "whatever makes sense" or "my advisor handles that." A few have heard of Roth-last rules and apply them loosely. Almost nobody has a written, sequenced withdrawal strategy that accounts for their tax bracket, RMD timeline, Social Security inclusion thresholds, and legacy goals simultaneously, across every year of retirement. That absence costs real money — often six figures in additional tax over a 20-year retirement, paid by people who never knew the order mattered.
The standard withdrawal framework: draw from taxable accounts first, then traditional pre-tax accounts, then Roth last. The logic holds up on its face — taxable accounts generate ongoing capital gains and dividends, so depleting them first removes that drag; traditional IRA money is pre-tax, so delaying withdrawal delays the tax bill; Roth money is tax-free and should compound untouched as long as possible.
Applied mechanically, without looking at your specific tax situation, that same rule can increase your lifetime tax bill. The years between retirement and age 73 are often a retiree's lowest-income years — Social Security hasn't started, earned income is gone. Following the conventional rule during that window means sitting in the 12% or 22% bracket while a traditional IRA compounds untouched. Every dollar left in that IRA eventually comes out as an RMD, in a higher bracket, in a year when Social Security is also fully taxable — potentially triggering IRMAA Medicare surcharges on top of it.
The more precise approach: every year in retirement, look at projected income from all sources and ask how much space remains in the current tax bracket — then fill that space with the most tax-efficient source available. Sometimes that's a Roth conversion. Sometimes it's an intentional IRA withdrawal before RMDs force the issue. The sequence is responsive, not static.
Two reasons. First, structural: the financial planning industry is organized around asset management, and the business model runs on assets under management — excellent infrastructure for accumulation, with almost nothing built for managing the tax sequence of withdrawals in distribution. Quarterly statements and performance reports don't show a year-by-year tax bracket projection or flag when a conversion window is closing.
Second, complexity: year-by-year bracket management across a 25-year retirement requires modeling Social Security inclusion formulas, IRMAA thresholds, capital gains rates, RMD projections, and Roth conversion math simultaneously, updated every year. It's ongoing work, not a one-time analysis — and most people don't know to ask for it because they don't know it exists. A couple can retire with a solid portfolio and a 4% withdrawal rate and genuinely be "on track" — while nobody has run the bracket projection for the pre-RMD window, missing one of the most expensive line items in their retirement.
Two people, both 66, nearly identical assets: a $900,000 traditional IRA, $150,000 Roth, $200,000 taxable brokerage, $32,000/year Social Security, and $84,000/year in expenses — a $52,000 annual income gap to fill from savings.
Richard follows the conventional rule: taxable account first, roughly $50,000/year for three years, then the IRA. By 69, his untouched IRA has grown past $1 million. His first RMD at 73 is approximately $45,000 — combined with Social Security, that lands him firmly in the 22% bracket, with IRMAA triggering higher Medicare premiums. His Roth, never touched, sits at $250,000, growing but underused.
Carol's advisor runs a bracket-filling analysis every January. In year one, she draws $20,000 from her taxable account and converts $40,000 from IRA to Roth, staying inside the 22% bracket without crossing into 24% — paying tax now, at a rate she controls, on income she chose. She repeats this through age 72, converting $30,000–$50,000 annually depending on Social Security phase-in and capital gains. By 73, her traditional IRA sits at $580,000 instead of over $1 million; her first RMD is $22,000 instead of $45,000. She stays in the 12% bracket, avoids IRMAA entirely, and her Roth — now $420,000 — keeps compounding tax-free.
Same starting assets. Same income need. Approximately $230,000 less in federal income tax over a 20-year retirement — not from a different investment selection, but from sequence, managed every year rather than set once at retirement and left alone.
Step one: get a year-by-year bracket projection before retiring — what income looks like at 65, 68, 70, and 73, where Social Security starts, and where RMDs kick in and at what size. That projection shows how much space is available in each year's bracket and how much IRA money can move at favorable rates.
Step two: build a conversion plan for the pre-RMD window. A traditional IRA balance of $500,000 or more between ages 60 and 72 means every year without a conversion plan is a year of the window going unused — a window that closes quietly at 73.
Step three: revisit the projection annually. Social Security COLA adjustments, market returns, and actual spending all shift the bracket picture — the right conversion amount at 67 may be wrong at 69.
Step four: coordinate with a tax advisor. Income sequencing lives at the intersection of income architecture and tax planning — the income side and the execution side need to work together, not separately.
"My accountant already handles my taxes." An accountant handles what already happened — filing accurately based on the year that closed. Income sequencing is forward-looking: which accounts to draw from, when to convert, how to manage the bracket for the next three to five years. Very few accountants run a ten-year Roth conversion model looking forward. Both conversations matter; they're not the same conversation.
"Why pay taxes now instead of later?" Because earlier doesn't always mean more. Converting in the 12% bracket now, ahead of a projected 24% or 32% bracket when RMDs hit, means paying less — not more. The real question isn't timing, it's rate: what rate will be paid, and is there an opportunity to choose a lower one now.
"It's all in a 401(k), not an IRA — does this apply to me?" Yes. At retirement or separation from service, most 401(k) balances can roll into a traditional IRA, unlocking the flexibility needed for Roth conversions, withdrawals, and sequencing that a 401(k) structure typically doesn't offer directly.
If your savings are primarily in pre-tax accounts and no one has run a year-by-year bracket projection for the decade between your retirement and your first RMD — this is the most time-sensitive conversation in your financial plan.
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