Which to access first, Traditional or Roth IRA?

[Tracer]

I originally posted this in the wrong forum. I am new here and just getting used to this place so let me try this again.

I'm not sure if this has been addressed yet. I am recently retired and will soon have to tap into my IRA's. I have both a Traditional and a Roth. I have gotten conflicting advise from two different financial advisers as to which I should tap into first. The adviser at Fidelity where I have my accounts says that as a general rule of thumb leave your Roth for last. He also says I could invest a little more aggressively in that account because it will be accessed much later. Another independent adviser I spoke to said you should access your Roth first, then Traditional. Looking for answers.

 

[LOL!]

If you do not have a taxable account, then
generally traditional first. See Optimal Retirement Calculator and Retirement Decision Support System .

You may wish to have a mixture where you use certainly withdraw some traditional to fill up your 0% tax bracket and maybe the 10% and 15% as well.

I would steer away from that "independent advisor" myself. If they couldn't explain what they were talking about, then why bother to ever talk to them again?

 

[REWahoo]

This program is a pretty good guide as to what withdrawal order is best for tax purposes: Optimal Retirement Calculator and Retirement Decision Support System

EDIT: Cross-posted with LOL!

 

[ziggy29]

If you do not have a taxable account, then
generally traditional first. See Optimal Retirement Calculator and Retirement Decision Support System .

You may wish to have a mixture where you use certainly withdraw some traditional to fill up your 0% tax bracket and maybe the 10% and 15% as well.

That's a pretty good calculator. And generally I would agree that I'd try to use up the lowest tax brackets with conventional IRA withdrawals and then switch to Roth and/or taxable account withdrawals when I was about to hit a higher marginal tax bracket.

Changes to Social Security and health care reform and how they may treat Roth distributions are currently an unknown. But at some point if Roth withdrawals are considered "income" for those purposes, some of the advantage of tapping the Roth would be lost.

 

[mathjak107]

if you think you will have any money left over to pass on to heirs the roths are golden for that..... spend everything ekse but.

 

[kyounge1956]

I think using the Traditional IRA before a Roth may also have a beneficial effect on the amount you will eventually be required to take as an RMD. If you use the Roth money first, the balance in the TIRA would be expected to grow and the higher balance at age 70-1/2 might force you to take out more than you want to, putting you into a higher tax bracket. Since there are no RMDs on a Roth, it doesn't matter how big your balance gets. You can withdraw as much or as little as you need. There's an interesting thread elsewhere on the Forum about taking Social Security early and then paying it back out of a TIRA which might also be relevant to your decision.

 

[jIMOh]

Much of this is a tax answer and not a general answer which you need.

For example, if your tax rate was high, tapping Roth first might lower taxes.
In another example, if your tax rate is low, tapping traditional first, with a LITTLE bit of Roth tapped to keep tax rate low might make sense.
In a third example, if you tap Roth first, there are less penalties for early withdraws, but the counter thesis to this is that if a 4th example exists, it might be that RMDs at age 70.5 put you in a higher tax bracket than if you withdraw money younger to avoid high tax bracket RMDs.

Bottom line- you need to use that calculator or another one.
Focus on your expenses (annual) and compare that to tax bracket caps at federal level, and also factor in state taxes too.