Assumptions:
(A) You have reached 59.5 so you can access your retirement accounts penalty fee.
(B) You have a sizable Traditional 401(k)/IRA and a sizable Roth 401(k)/Roth IRA.
Question 1: Which do you draw from first?
I have a number of years to think this one through as I am only 51 and probably won't be drawing on these accounts before 59.5 (if even then), but is it better to first draw down funds that are taxed on distribution like your traditional 401k and traditional IRA, or to first draw from funds that you can take tax free like your Roth 401k and my Roth IRA?
My gut feeling is you pull from your taxed on distribution retirement accounts (traditional 401k and traditional IRA) and leave the Roths to grow tax free until you are forced to use them.
Question 2: Are Roth distributions included in your income calculation?
As a side thought, and as a possible reason someone might look at drawing from the Roth first is to keep their income low for Obamacare purposes, assuming a Roth distribution is not included in annual income calculation while a traditional 401k or traditional IRA distribution would be. Even then, I suspect the value of maintaining the additional years of tax free growth in your Roth for yourself and heirs exceeds any Obamacare savings for the years between 59.5 and 65 while you are awaiting Medicare eligibility.
(A) You have reached 59.5 so you can access your retirement accounts penalty fee.
(B) You have a sizable Traditional 401(k)/IRA and a sizable Roth 401(k)/Roth IRA.
Question 1: Which do you draw from first?
I have a number of years to think this one through as I am only 51 and probably won't be drawing on these accounts before 59.5 (if even then), but is it better to first draw down funds that are taxed on distribution like your traditional 401k and traditional IRA, or to first draw from funds that you can take tax free like your Roth 401k and my Roth IRA?
My gut feeling is you pull from your taxed on distribution retirement accounts (traditional 401k and traditional IRA) and leave the Roths to grow tax free until you are forced to use them.
Question 2: Are Roth distributions included in your income calculation?
As a side thought, and as a possible reason someone might look at drawing from the Roth first is to keep their income low for Obamacare purposes, assuming a Roth distribution is not included in annual income calculation while a traditional 401k or traditional IRA distribution would be. Even then, I suspect the value of maintaining the additional years of tax free growth in your Roth for yourself and heirs exceeds any Obamacare savings for the years between 59.5 and 65 while you are awaiting Medicare eligibility.
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