Smart Withdrawal Strategies to Keep More of What You’ve Saved
You’ve worked hard, saved carefully, and now you’re finally retired—or getting close. But while you may have planned for market ups and downs, inflation, and rising healthcare costs, there’s one silent threat many retirees overlook: taxes.
It’s not unusual for retirees to pay more in taxes than necessary, simply because they don’t understand how retirement income is taxed—or how to time their withdrawals smartly.
The good news? A few simple strategies can help you keep more of your money, stretch your savings further, and avoid surprise tax bills in retirement.
In this post, we’ll cover how to manage withdrawals from IRAs, Roth IRAs, and Social Security, so your nest egg works harder for you—not the IRS.
Why Taxes Matter So Much in Retirement
In retirement, you’re not getting a paycheck anymore—but you are still generating income. It might come from:
- Traditional IRA or 401(k) withdrawals
- Social Security benefits
- Pensions or annuities
- Dividends and capital gains
- Roth IRA withdrawals (if you planned ahead)
The problem? Not all income is taxed the same way, and how you sequence your withdrawals matters more than ever. Poor planning can push you into higher tax brackets, increase your Medicare premiums, and make more of your Social Security taxable.
Let’s break down how to avoid these traps.
Step 1: Understand How Retirement Income Is Taxed
Here’s a quick overview of how your income sources are treated:
- Traditional IRA/401(k) withdrawals – Fully taxable as ordinary income
- Social Security benefits – Up to 85% may be taxable, depending on other income
- Roth IRA withdrawals – Tax-free if the account is over 5 years old and you’re over 59½
- Dividends and capital gains – Taxed at lower rates (0% to 20%), depending on your bracket
- Municipal bond interest – Often tax-free at the federal level
Now let’s look at how timing your withdrawals wisely can reduce your tax burden.
Step 2: Be Strategic With IRA and Roth Withdrawals
Many retirees default to tapping traditional IRAs first, delaying Roth IRA withdrawals for later. But that could lead to higher taxes down the road, especially when Required Minimum Distributions (RMDs) kick in at age 73.
Here’s a smarter approach:
🔹 Withdraw from IRAs before RMDs start
If you’re in a lower tax bracket in your early retirement years (say, before Social Security or pension income starts), consider taking moderate IRA withdrawals during those years.
This lowers your future RMDs and takes advantage of lower marginal tax rates now.
🔹 Consider Roth conversions
Convert some traditional IRA funds to a Roth while your tax rate is low. Yes, you’ll pay tax now—but future withdrawals will be tax-free, and they won’t count against your Social Security or Medicare thresholds.
🔹 Use Roth IRAs strategically later
Once RMDs begin, you can supplement your income by withdrawing from Roth IRAs tax-free—without increasing your taxable income or Medicare premiums.
Step 3: Don’t Accidentally Trigger Taxes on Social Security
Many retirees are shocked to learn that up to 85% of their Social Security benefits can be taxed. Whether it happens depends on your provisional income:
Provisional income =
- ½ of your Social Security benefits
- taxable IRA withdrawals
- interest and other income
If your provisional income exceeds:
- $25,000 (single) or $32,000 (married) → some benefits become taxable
- $34,000 (single) or $44,000 (married) → up to 85% of benefits are taxable
To avoid this:
- Withdraw from Roth IRAs or use cash savings in years when you’re receiving Social Security
- Delay Social Security until full retirement age or age 70 to get higher benefits—and reduce the number of years those benefits are taxed
- Spread out IRA withdrawals earlier to avoid large RMDs that push you over the threshold later
Step 4: Avoid Medicare Surcharges
Another sneaky tax hit comes from IRMAA—Income-Related Monthly Adjustment Amounts. If your modified adjusted gross income (MAGI) exceeds certain thresholds, you’ll pay higher Medicare Part B and Part D premiums.
In 2025, IRMAA surcharges start if your MAGI is over:
- $103,000 (single)
- $206,000 (married filing jointly)
Large withdrawals, Roth conversions, or capital gains in a single year can trigger these surcharges for the following year.
To avoid this:
- Spread large withdrawals over several years
- Use Roth IRAs or municipal bond interest (which don’t count toward IRMAA thresholds)
- Be aware of income timing and year-end tax planning
Step 5: Use Tax-Smart Withdrawal Order
A general rule of thumb for minimizing taxes in retirement:
- Use taxable accounts first (dividends and capital gains are often taxed at lower rates)
- Withdraw from traditional IRAs/401(k)s during low-income years (before RMDs)
- Tap Roth IRAs last to maximize tax-free growth and flexibility
- Consider annuities with tax deferral if income smoothing is needed
But remember: your situation is unique. This order may shift depending on your Social Security timing, pension income, or unexpected expenses.
Quick Tips to Keep More of Your Money
- ✅ Start planning your withdrawal strategy before you retire
- ✅ Use a qualified tax advisor or financial planner who understands retirement
- ✅ Reevaluate your tax plan each year—not just during tax season
- ✅ Keep track of how income affects tax brackets, IRMAA, and Social Security taxation
Final Thoughts: Plan Smarter, Not Just Harder
You’ve spent decades building your nest egg. The last thing you want is to watch it shrink faster than expected—just because of poor tax planning.
The truth is, most retirees can reduce their tax bill significantly with just a little forethought and guidance. Timing matters. Withdrawals matter. And how you coordinate income sources—like IRAs, Roth IRAs, and Social Security—can have a huge impact on your financial future.
Don’t let taxes quietly drain your hard-earned savings. Take control now—and keep more of what’s yours.
This post is adapted from my book: Financial Survival for Seniors: 18 Financial Mistakes Most Retirees Make and How to Fix Them, available now at Amazon.com in paperback and eBook formats. Inside, you’ll find real-world solutions to avoid costly missteps—and smart strategies to protect your money, your lifestyle, and your peace of mind.
Disclaimer: This blog post is for informational and educational purposes only. It does not constitute tax, legal, or financial advice. Every individual’s situation is unique. Consult a qualified tax advisor or financial planner before making decisions about withdrawals, Roth conversions, or Social Security planning.