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post or pre tax first ?
Old 11-09-2010, 07:02 PM   #1
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post or pre tax first ?

Retiring next week. Should withdrawals be made first from a post tax account (i.e. Roth IRA) until its at zero and then go to pre-tax withdrawals (conventional IRA) ?
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Old 11-09-2010, 07:12 PM   #2
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Retiring next week. Should withdrawals be made first from a post tax account (i.e. Roth IRA) until its at zero and then go to pre-tax withdrawals (conventional IRA) ?
This depends on your circumstances, but I would lay off the Roth until you are forced to raid it.

Walkinwood posted an article about this topic today.

Aside from leaving the Roth undisturbed, you have pre-tax funds, taxable accounts, and (eventually) social security. IMO there is a lot of bad advice around on these topics. Factors are married or not, amount in various accounts, cash needs and other income, and SS payments at various ages.

The article cited suggests withdrawing pretax funds first (IRA, 401K, etc.)provided you have reached age 59 1/2, putting off SS until age 70 (especially if you are married or female, and leaving post tax funds and Roths alone.

If you are below 59 1/2, there are various fancy withdrawal ideas, I think one called 72T. These are discussed from time to time around here
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Old 11-09-2010, 07:32 PM   #3
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Retiring next week. Should withdrawals be made first from a post tax account (i.e. Roth IRA) until its at zero and then go to pre-tax withdrawals (conventional IRA) ?
As haha suggests, take a look at this thread and artlicle on withdrawal strategies

Tax consideration for taxable, IRA & SS revenue streams
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Old 11-09-2010, 08:24 PM   #4
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IMO there is a lot of bad advice around on these topics. Factors are married or not, amount in various accounts, cash needs and other income, and SS payments at various ages.
I agree with Ha's statement, there is a lot of bad advice on this topic, and especially the very simplistic advice that has been gospel for years is "leave you pre-tax money to grow as long as possible." That seems dead wrong because it's the only account that has forced withdrawal rules. If you grow it till you are 70.5 you will suddenly be forced to take a potentially large income that will be taxed as ordinary income. But, even the article that is linked has some flawed logic, at least to my way of thinking! It really seems to be a topic that has no "one size fits all" answer.
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Old 11-09-2010, 08:40 PM   #5
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The linked article is a decent start. Your answer depends heavily on your specific circumstances, and taxes are the main driver. You generally want to minimize taxes over your retirement. That probably leads to using the regular IRA to fill up your lowest tax bracket and the Roth to meet any additional income requirements. That way you are paying the lowest taxes possible on your IRA. The article describes how Social Security taxation modifies that simple case. You may also be able to convert some of the IRA to a Roth during early retirement if you can live off non-retirement accounts without generating taxable income. Find all the ideas you can and see if they apply to your case.
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Old 11-09-2010, 08:46 PM   #6
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What Animorph said. This calculator which has been referenced before uses this approach.

Optimal Retirement Calculator and Retirement Decision Support System
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