New Research on Drawing Income in Retirement

Nothing is ever as simple as it first seems.  The latest entry in this category questions basic conventional wisdom (CW) of drawing down taxable accounts, then qualified accounts (IRAs, 401(k)s, etc.), and finally Roths.

The study by Coopersmith, Sumutka, Arvensen of Rider University entitled "Optimal Tax-efficient Planning of Withdrawals from Retirement Accounts" shows that CW is not always correct.  In the critical period leading up to the RMDs at age 70 and 1/2, it may pay to draw funds from IRAs, etc.  Avoiding RMDs that throw a retiree into a higher tax bracket can have an important impact.

An overview of the study is presented by Susan B. Garland of Kiplinger in "A New Rule of Thumb for Tapping Savings."