Best Tax Deferred/After Tax Withdraw Plan?

[pmac]

I am hoping to transistion from attorney to recovering attorney early next year at 62. My bride will be 66 next year and retired 4 years ago with a good state pension. We have been forunate enough to saved approximately 1.8M. If the market doesn't tank, we can probably both delay SS to 70. Our current thought is based on 3.5% withdrawal rate. We have a stock/bond/cash ratio of 73/17/10. Of that about 65% is in tax deferred investments with 35% after tax investment/bonds/cash.

What I am unclear about is the best withdrawal plan to maximize tax benefits. Should we withdraw after tax investments first, or tax deferred investments first, or a blend based on a formula? If a blend, how do you go about calculating the blend?

[DrRoy]

I will not RE for just under a year, but my situation is fairly similar to yours. I believe that it is better for long term taxes to begin pulling from tax deferred investments right away. These accounts (IRA's, 401K's, etc.) have minimum required distributions so that the feds will get their deferred taxes. The sooner you begin the withdrawls (and you cannot legally defer forever), the smaller they will be, and the less tax you will owe on them each year. If you defer to the max, the minimum distributions will be larger, and the risk is that you will push yourself into a higher bracket and then pay more tax.